Bill Ackman cancels SPAC deal with Universal Music.

Billionaire investor Bill Ackman said on Monday, withdrew from a plan Using its massive SPAC to buy a stake in the world’s largest record label, Universal Music Group, after the Securities and Exchange Commission expressed concerns about the complex transaction.

Under the proposed deal, Mr. Ackman’s special purpose buyout, or SPAC, would buy a 10 percent stake in Universal Music, the company behind Taylor Swift, Lil Wayne and Lady Gaga, valuing the company at more than $40 billion.

But the deal would be complicated, and the SEC was concerned about whether it was a SPAC deal. These blank check companies, which use public-market capital to invest in a private company and go public in the process, have garnered a lot of interest from investors over the past year and increased regulatory scrutiny.

In a letter to investors, Mr. Ackman said the team at investment firm Pershing Capital had not changed the agency’s mind on the matter. multi-layered agreement. Investors in SPAC, known as Pershing Capital Tontine Holdings, also appeared cautious: Its shares had lost about a fifth of their value since the deal was announced.

“We underestimated the reaction some of our shareholders will have to adapt to the complexity and nature of the transaction,” wrote Mr. Ackman.

The deal required Pershing Square Tontine to invest $4 billion in a 10 percent stake in Universal Music, which has already been offered to the public by its parent company, Vivendi. This would leave $1.5 billion in the investment vehicle, which would be transferred to a new public buyout fund that wanted to make another deal. Existing investors in Pershing Square Tontine would receive a financial instrument that entitles them to purchase another deal instrument seeking its own takeover target.

While Mr. Ackman’s SPAC is backing out of the Universal Music deal, Mr. Ackman isn’t – his hedge fund will buy the stake outright.

Pershing Square Tontine now has 18 months to find and close a new deal unless shareholders give it more time, and Mr. Ackman said, “Our next business combination will be structured as a traditional SPAC merger.”