Pershing Square to bring down discount

After a 6-month period consulting with investors on how to improve the attractiveness of Pershing Square’s listed vehicle, it was announced in March that the fund is seeking a London listing complementing its existing Amsterdam listing. At the same time the it has increased the maximum holding threshold, allowing the manager to buy back more shares without forcing large investors out at a discount.

Following admission to the London Stock Exchange, it is expected that Pershing Square Holdings (“PSH”) will be eligible for inclusion in the FTSE UK Index Series, including the FTSE All‐Share and FTSE 250 indices. The Company’s listing on Euronext Amsterdam will not be affected. Following Admission, investors will be able to trade PSH shares on both markets with PSH shares being quoted and traded in Sterling in London and in USD on Euronext Amsterdam. PSH has decided to seek a premium listing in London in an effort to improve market access for investors, increase liquidity in PSH shares, and assist in narrowing the current discount to net asset value at which PSH shares trade.

What might be more meaningful in the short term is the fact that Pershing Square has increased the maximum position size see for investors from 4.75% to 4.99%. One of the main problems for the fund to buy back shares was that a buyback would push certain investors over the 4.75% threshold and as a result it would force these investors out of the fund at a discount to NAV, an undesirable outcome. The increased new maximum holding percentage implies that the fund can now buy back 5% of shares without forcing any investors out. This equates to 2.5x the average monthly turnover. While we expect the fund to execute such a buyback, the timing is unclear as the manager needs a window in which it is not restricted from trading in the fund which typically occurs 3-4 times a year.

The discount in the year to date already has shrunk by some 7%. However, the listed fund still trades at a 15% discount which in our view will prove unsustainable.