What's going on?

Bill Ackman’s special-purpose acquisition company (SPAC) is reportedly looking to buy a stake in music label Universal Music Group, but only after it smashes up its hotel room.

What does this mean?

SPACs � listed shell companies that merge with unlisted companies to fast-track their arrival onto the stock market � kicked off in a big way last year. And among the onrush of new contenders came one from hedge fund wunderkind Bill Ackman � a pedigree that helped it raise $4 billion this time last year.

Now, Ack�s SPAC is looking to buy 10% of Universal Music Group from French music giant Vivendi for $4 billion. That�d value the company at around $40 billion � up from the $36 billion it was penciled in at when China�s Tencent bought its own stake back in 2019.

Why should I care?

The bigger picture: Please don�t stop the music.

Sure, a music label might seem like a left-field choice at a time when streaming platforms� subscriber growth is slowing down. But there might actually be a lot of money in owning superstars� back catalogs, whose royalties could provide a steady and substantial income. What�s more, Western music streaming services are relatively scarce in Asia, which means there�s still a lot of room for growth elsewhere � if a label can handle the risk of piracy, that is.

Zooming in: The Ackman name isn�t a guarantee.

If a SPAC doesn�t do a deal within two years of listing on the stock market, it has to return all the capital it raised. And given that Ackman�s is 12 months deep, the pressure is on. But even if the deal does go ahead, SPACs� track record is choppy: only 26 of the 89 listed between 2015 and July 2020 delivered gains. Combine that with a slowdown in funding from institutional investors, and it might only be a matter of time before the SPACs craze fizzles out.