After a nice move since September, Pershing Square Tontine Holdings (NYSE:PSTH) stock has hit some turbulence. Of course, this has been the case with many other SPACs (special purpose acquisition companies) lately as volatility has swept through.
Now as for PSTH stock, it has the backing of one of the world’s top investors: Bill Ackman. He also is no stranger to SPACs. In 2014, he orchestrated a merger with Burger King and Tim Hortons to create Restaurant Brands International (NYSE:QSR).
So then, with PSTH stock, what company might he merge with? Well, this is really a matter of speculation!
But it seems like the deal will be large. There may also be a focus the tech industry, especially since this has been the main focus of SPAC investors. But then again, Ackman may still wind up making a deal with a traditional company.
So then, let’s take a look at some options:
- Scale AI
Pershing Square SPAC: OutSystems
Low-code is one of the hottest areas of technology. It essentially allows for creating sophisticated enterprise apps without having to understand computer languages. The result is that the development process is quicker — and even more customized.
A top player in the space is OutSystems. In fact, it is not a typical Silicon Valley operator. Keep in mind that the company was founded in 2001 in Lisbon, Portugal! The early days were a struggle, as there was little interest in cloud solutions after the dot-com bust.
But the founders persisted and wound up building a robust platform. Today, the company has over 1,200 customers across more than 60 countries. The OutSystems platform has a wide assortment of use cases, such as for field-service optimization, SAP (NYSE:SAP) integration, case management, process automation, customer experience, business process management and so on. And yes, the company has been investing aggressively in artificial intelligence (AI) solutions.
During the past year, growth has accelerated because of the Covid-19 pandemic. Companies have had to scramble to implement new systems to manage remote working and contactless customer engagement.
In February, OutSystems raised $150 million in capital, and the valuation was at a hefty $9.5 billion. The lead investors included Abdiel Capital and Tiger Global.
TripActions operates an online platform that allows for better management of business-travel expenses. But with the Covid-19 pandemic, the business has suffered.
But with the rollout of vaccines, TripActions should see momentum. Even though video conferencing — such as with offerings from Zoom (NASDAQ:ZM) — has become widespread, there will still be a strong need for in-person business travel. Besides, TripActions has ramped up its research and development (R&D) efforts, such as by developing features to help with the pandemic. Furthermore, consider that there are over 4,000 customers.
In January, the company was able to raise $155 million — which was certainly a signal that the company’s future looks bright. The investors included Andreessen Horowitz, Zeev Ventures, Lightspeed Venture Partners and Greenoaks Capital. The valuation on the round came to about $5 billion.
Here’s what TripActions CEO Ariel Cohen had to say: “Despite the events of 2020, we’ve seen accelerated adoption by companies of all sizes and industries, growing our book of business to over $3.6 billion, and adding our largest accounts to-date.”
No doubt, one of the hottest areas for SPACs is the EV (electric vehicle) space. The huge success of Tesla (NASDAQ:TSLA) has been a major factor. But it also looks like the automotive industry is at an inflection point as technologies like AI begin to show much progress.
And Nuro could be an interesting play for Pershing Square. The founders include engineers from Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG). The company has also been able to recruit top talent from companies like Waymo.
In early January, Nuro announced its first self-driving EV, the R1, which was solely for cargo. For the most part, the development has been swift. Note that the company is now working on the second generation of its EV, which is focused on the delivery of a broad array of items like prepared foods, medicine and retail products — all in a safe and secure manner.
In the meantime, Nuro has received the only federal exemptions for autonomous vehicles from the U.S. Department of Transportation (DOT) and National Highway Traffic Safety Administration (NHTSA). Additionally, there have been partnerships forged with companies like Walmart (NYSE:WMT), CVS Health (NYSE:CVS) and Kroger (NYSE:KR).
In November, the company raised $500 million from T. Rowe Price Associates, Inc. (NASDAQ:TROW), Fidelity, Baillie Gifford, SoftBank Vision Fund 1 and Greylock. The valuation was struck at $5 billion.
A major challenge with AI is labeling the data, which often involves manual labor. This can be expensive and time-consuming when the datasets are massive.
But Scale AI is focused on solving this problem. The founder of the company, Alex Wang, started the operation in 2016 when he was only 19 years old. He actually got the idea for his company while he at Quora.
As for Scale AI, it is a mix of sophisticated API (application programming interface) technology and human input. And yes, the system has significant adoption, such as from customers like General Motors (NYSE:GM), Airbnb (NASDAQ:ABNB), SAP, Nvidia (NASDAQ:NVDA) and Samsung. It also looks like the company is break-even, which should be a big plus for Pershing Square.
Consider that Scale AI is looking beyond labeling. To this end, the company has released Nucleus, which is an application that helps with data management.
Late last year, Scale AI raised $155 million — led by Tiger Global — and the valuation was set at over $3.5 billion.
Reddit has gotten lots of buzz this year from the stock market frenzy. The site hosts one of the most powerful investing forums, r/WallStreetBets, which has been the catalyst for the big surges in companies like GameStop (NYSE:GME) and AMC (NYSE:AMC).
So hey, this seems like a good fit for Bill Ackman, who is a maestro of investing, right? Definitely.
Besides, social media continues to be in the secular growth mode. The platforms have become must-haves for companies to reach customers.
As for Reddit, it has roughly 52 million daily active users, up about 44% on a year-over-year basis (as of October 2020). The company has also raised capital this year. So far, the amount has come to $367 million, and the goal is to hit $500 million.
The origins of Wawa go back to 1803 when the company was an iron foundry. By the end of the century, the business would transition to becoming a dairy operation.
It was certainly a smart move, as growth was strong. However, when milk started to be purchased in stores during the 1960s, Wawa invested in its own locations. This would mark the emergence of the convenience store.
Now there are over 850 stores, which are located in a handful of states like Virginia, Florida, Delaware and Pennsylvania (according to Forbes, the revenues are about $13 billion). In other words, there is lots of room for more growth — and this is where a SPAC deal from Pershing Square could help.
In the late 1950s, John Menard Jr. made money while in college developing buildings. As business expanded, he started to sell lumber, and the business did quite well.
All this would ultimately turn into a major retail chain of home improvement stores called Menards. Currently, there are 335 locations across 15 states like Ohio, Michigan, Indiana, Illinois and Wisconsin. The company is actually No. 3 in its category, only behind Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW). According to Forbes, the sales are at about $10.7 billion.
A company like Menards could be interesting to Pershing Square because of its powerful brand and the strong secular trends. But there are also opportunities to move into other states as well as to boost the e-commerce platform.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.
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