PERSHING SQUARE TONTINE HOLDINGS, LTD. Management report and analysis of the financial situation and operating results. (Form 10-K)

The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this Report. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.

Overview

We are a blank check company incorporated as a Delaware corporation and formed
for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses. We intend to effectuate our Initial Business Combination
using cash from the proceeds of the initial public offering and the private
placements of the Sponsor Warrants, Director Warrants and Forward Purchase
Units, our capital stock, debt or a combination of cash, stock and debt. Our
Initial Business Combination will be a negotiated transaction, not a hostile
takeover.

The issuance of additional shares of our shares in connection with a business combination, including the Forward purchase securities and any private investment in public securities, or PIPE, can:

  •   significantly dilute the equity interest of investors;


• subordinate the rights of the holders of our ordinary shares if they are preferred shares

          is issued with rights senior to those afforded our common stock;


• result in a change of control if a substantial number of shares of our common stock

stock is issued, which may affect, among other things, our ability to use

          net operating loss carry forwards, if any, and could result in the
          resignation or removal of our present directors and officers;



     •    have the effect of delaying or preventing a change of control of us by
          diluting the stock ownership or voting rights of a person seeking to
          obtain control of us; and



     •    adversely affect prevailing market prices for our shares of Class A
          Common Stock and/or Redeemable Warrants.

Similarly, if we issue debt securities or otherwise incur material indebtedness, it could result in:

• default and seizure of our assets if our operating income after our

          Initial Business Combination are insufficient to repay our debt
          obligations;


• acceleration of our debt repayment obligations even if we make

all principal and interest payments when due if we breach certain

covenants requiring the maintenance of certain financial ratios or

          reserves without a waiver or renegotiation of that covenant;


• our immediate payment of all principal and accrued interest, if any, if

          the debt security is payable on demand;



     •    our inability to obtain necessary additional financing if the debt
          security contains covenants restricting our ability to obtain such
          financing while the debt security is outstanding;



  •   our inability to pay dividends on our common stock;



     •    using a substantial portion of our cash flow to pay principal and
          interest on our debt, which will reduce the funds available to pay
          expenses, make capital expenditures and acquisitions, and fund other
          general corporate purposes;


• the limits of our flexibility in planning and reacting to changes in

          our business and in the industry in which we operate;



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• increased vulnerability to adverse changes in the general economy, industry

and competitive conditions and adverse changes in government regulation;

the limits on our ability to borrow additional money for our expenses,

          capital expenditures, acquisitions, debt service requirements, and
          execution of our strategy; and


• other purposes and other disadvantages compared to our competitors who

have less debt.


We expect to continue to incur costs in the pursuit of our acquisition plans. We
cannot assure you that our plans to complete our Initial Business Combination
will be successful.

Recent Developments

Proposed and Subsequent Cancellation of an Initial Business Combination

Below is a description of the initial proposed business combination, which was ultimately not completed.

On June 20, 2021, the Company entered into a Share Purchase Agreement (the
"Share Purchase Agreement") with Vivendi SE to purchase a number of ordinary
shares, par value €10 per share (the "UMG Shares"), representing approximately
10% of the share capital and voting rights, on a fully diluted basis, of
Universal Music Group ("UMG") for approximately $4 billion (the "Share
Purchase"), with the expectation that the Company would distribute the UMG
Shares to its Public Stockholders (the "Distribution" and together with the
Share Purchase, the "Proposed IBC"). The Company expected that the Share
Purchase would be consummated in the third quarter of 2021 and the Shares held
in trust under the Distribution which would occur in November or December 2021.

In connection with the Proposed IBC, the Company and Vivendi also entered into
an indemnification agreement pursuant to which the Company agreed to indemnify
Vivendi and certain of its related parties for certain potential liabilities in
connection with the Company's redemption tender offer, the warrant exchange
offer and the Distribution (each as further described below).

Also on June 20, 2021, the Company, the Sponsor, the Pershing Square Funds and
the Company's independent directors entered into the Pershing Entities Letter
Agreement, pursuant to which:

• The Company and the Pershing Square Funds have agreed to amend and restate

           the Forward Purchase Agreement concurrently with the closing of 

the

           Proposed IBC, pursuant to which the Forward Purchasers would 

exercise

           their right to purchase an aggregate amount of $1.6 billion of 

Cheeky

           Purchase Units ($1.0 billion of Committed Forward Purchase Units 

and

           $600 million of Additional Forward Purchase Units). The price 

per share

           at which the Pershing Square Funds would have exercised such amended
           Forward Purchase Agreement would be equal to RemainCo's (defined below)
           net asset value at the time of such purchase;



       •   The Company and the Sponsor agreed to amend the Sponsor Warrants
           concurrently with the closing of the Proposed IBC, such that the Sponsor
           Warrants would not be exercised or otherwise participate in the Proposed
           IBC. Instead, they would remain in place, but the exercise price would
           be adjusted to equal 120% of RemainCo's net asset value

immediately

           prior to the time it completed its anticipated future business
           combination with an operating business; and


• The Company and its independent directors have agreed that the director

           Warrants would not be exercised in connection with the Proposed 

BAC, and

           would be amended concurrently with the closing of the Proposed 

BAC. the

           result of such amendment would have been that, (i) the holders 

from

           Director Warrants would receive shares in the Company in 

exchange against

           approximately 72% of the fair market value of the Director

Warrants (such as

           determined by a third-party valuation firm), to compensate for 

the fact

           that they would not participate in the Proposed IBC as 

initially

           envisioned, (ii) such shares would participate in the 

Broadcast and

           (iii) the roughly 28% of the value of the Director Warrants

would remain

           in place with their exercise price adjusted in the same manner as the
           exercise price of the Sponsor Warrants as explained above.


The Company further announced that it expected to undertake a 1:4 reverse stock
split following the issuance of the Distributable Tontine Redeemable Warrants,
all warrants in respect of the Forward Purchase Agreement and Director Forward
Purchase Agreements and the Distribution to target a net asset value ("NAV") of
approximately $22 per share.

Pursuant to the Proposed IBC, following the Distribution, the Company would have
continued to exist and it would not have disappeared into UMG nor would it have
been liquidated. The Company that would have continued to exist is referred to
herein as "RemainCo". RemainCo would have been the same corporate entity and it
would have continued to be named Pershing Square Tontine Holdings, Ltd. The
Public Stockholders would have continued to own shares in RemainCo, and it was
intended that RemainCo would pursue a traditional business combination with an
operating business (RemainCo's "Future Business Combination").

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On July 8, 2021, the Company launched (i) a redemption tender offer which was
intended to provide Public Stockholders with the opportunity to exercise their
right to redeem their shares of Class A Common Stock in connection with the
Proposed IBC and (ii) a warrant exchange offer which provided holders of the
Company's currently outstanding Distributable Redeemable Warrants the
opportunity to exchange those warrants for shares of Class A Common Stock at a
ratio of 0.2650 shares per warrant.

On July 19, 2021, the Company announced that its board of directors had
unanimously determined not to proceed with the Proposed IBC and the Company had
agreed to assign its rights and obligations under the Share Purchase Agreement
with Vivendi to Pershing Square Holdings, Ltd. and certain of its affiliates
(the "Assignees"). The Assignees agreed to purchase or cause to be purchased at
least 5% of the share capital of UMG on the terms and subject to the conditions
of the Share Purchase Agreement and Vivendi acknowledged that if the Assignees
purchased at least 5% of the share capital of UMG, the Share Purchase Agreement
would be of no further force with respect to remaining UMG shares to be
purchased under the Share Purchase Agreement. In addition, the Assignees,
severally in accordance with their obligations to purchase UMG shares, agreed to
assume and reimburse the Company for
out-of-pocket
expenses incurred to that time by the Company in connection with transactions
related to the Proposed IBC, which totaled $25.1 million. The Assignees also
assumed, severally in accordance with their obligations to purchase UMG shares,
the Company's obligations under the indemnification agreement, between the
Company and Vivendi.

On July 21, 2021, the Company terminated its redemption tender offer and warrant
exchange offer, and no shares were redeemed from the Company. As a result of the
termination of these offers and the cancellation of the Proposed IBC, the
Pershing Entities Letter Agreement did not come into effect and there have been
no changes to the instruments discussed as exhibits to such letter agreement.
The FPA, Sponsor Warrants and Director Warrants remain as initially issued as of
June 21, 2020 and July 21, 2020, respectively.

The Company continues to seek a first business combination.

On August 10, 2021, the Assignees completed an initial closing under the Share
Purchase Agreement, as a result of which the Company was released from its
obligations under the Share Purchase Agreement and the indemnification agreement
described above (which indemnity was allocated without the participation of the
Company, among the Pershing Square Funds). Also on August 10, 2021, the Company
entered into an assignment of the registration rights agreement to the
Assignees, at which time the registration rights agreement was amended to
provide, among other things, the Assignees certain rights to register UMG shares
for a public offering no earlier than 2023 rather than providing for the
Distribution that the Company originally envisioned.

Some observations

During the first two months of 2022, we have continued to work on identifying a
target for an Initial Business Combination. For the year ended December 31,
2021, we recorded net income of $833,301,124, which was primarily due to a
non-cash
GAAP gain of $836,147,258 related to the change in valuations of our Public
Warrants, Sponsor Warrants, Director Warrants ("Private Placement Warrants",
collectively with the Public Warrants, the "Outstanding Warrants") and the
Forward Purchase Agreement and Director Forward Purchase Agreement
(collectively, the "FPA"), each of which was previously accounted for as equity
on our financial statements through December 31, 2020. The change in accounting
was initiated following a statement by the Staff of the Securities & Exchange
Commission on accounting for SPAC warrants. Following the SEC's public
statement, management along with the audit committee reconsidered accounting
issues related to these instruments and restated our financial statements at
December 31, 2020 to account for our Outstanding Warrants and FPA as derivative
liabilities. For the year ended December 31, 2021, this accounting treatment has
required us to record a
non-cash
gain which we believe will not have any effect on our ability to consummate an
initial business combination.

Changes in our stock price could lead to large fluctuations of fair value as a
result of this accounting treatment. If our stock price increases over a given
measurement period, the fair values of our warrants and FPA will also increase
in value and result in a liability being recorded on our balance sheet and a
non-cash
GAAP loss recorded in our earnings statement for the period, all other things
being equal. Conversely, if our stock price declines over a measurement period,
we will record a smaller liability or an asset on our balance sheet and report a
non-cash
GAAP gain in our earnings statement, notwithstanding that our stockholders will
be holding shares that have declined in value over the measurement period.

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Non-monetary

GAAP gains or losses due to changes in the fair value of such instruments have
no impact on our cash balances - including the more than $4 billion we hold in a
trust account at J.P. Morgan - and the minimum Committed FPA of $1 billion, nor
do we expect the change in accounting to have any impact on our ability to
consummate a potential initial business combination.

Operating results

All activities through December 31, 2021 were related to the Company's
organizational activities, preparation for the Company's initial public
offering, identifying a target company for a business combination and activities
in connection with the Proposed IBC and its subsequent cancellation. We will not
generate any operating revenues until after completion of our Initial Business
Combination. We generate
non-operating
income in the form of interest and dividends on cash and cash equivalents, and
marketable securities held in the trust account. We incur ongoing expenses as a
result of being a public company for legal, financial reporting, accounting and
auditing compliance, as well as for due diligence and Initial Business
Combination related transaction expenses.

For the year ended December 31, 2021, we had net income of $833,301,124, which
consisted of
(i) non-cash
gain related to change in the fair value of Forward Purchase Agreement
liabilities/assets of $598,782,500, (ii)
non-cash
gain related to change in the fair value of Outstanding Warrant liabilities of
$237,364,758, (iii) income earned on marketable securities held in the trust
account of $1,850,026, (iv) IBC related fees reimbursement of $1,343,817, and
(v) interest and dividends earned on marketable securities held in the operating
account of $2,146, offset by (a) legal, insurance, research, franchise tax and
other expenses totaling $5,734,774, and (b) provision for income taxes of
$307,349.

For the period from May 4, 2020 (inception) through December 31, 2020, we had
net loss of $954,881,205, which consisted of
(i) non-cash
loss related to change in the fair value of Forward Purchase Agreement
liabilities/assets of $593,893,320, (ii)
non-cash
loss related to change in the fair value of Outstanding Warrant liabilities of
$358,644,962, (iii) offering costs attributed to Outstanding Warrant liabilities
of $912,625, (iv) legal, insurance, research, franchise tax and other expenses
totaling $1,489,208, (v) IBC related fees of $1,343,817, and (vi) provision for
income taxes of $289,155, offset by (a) income earned on marketable securities
held in the trust account of $1,690,454, and (b) interest and dividends earned
on marketable securities held in the operating account of $1,428.

Non-GAAP

Financial measures

As noted above, the Company was formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or
similar business combination with one or more businesses. As such, we believe
the amount of committed capital available for an Initial Business Combination is
critical to our success as a blank check company. See Liquidity and Capital
Resources below for further information on our unrestricted cash balances and
funds held in the trust account as of December 31, 2021. In addition, we report
adjusted net loss, which is a
non-GAAP
financial measure that is not required by, or presented in accordance with,
GAAP. Management uses this
non-GAAP
measure to evaluate results as it reduces the volatility of operations due to
the accounting for our warrants and forward purchase agreements, which are more
fully described in Note 2 of the Notes to Financial Statements included herein,
and which do not have an impact on the funds held in the trust account or
committed capital available for an Initial Business Combination. We believe this
information is useful to investors for these reasons. This
non-GAAP
measure should not be considered a substitute for the most directly comparable
GAAP measures, which are reconciled below. Further, this measure has limitations
as an analytical tool, and when assessing our operating performance, you should
not consider this measure in isolation or as a substitute for GAAP measures. We
may calculate or present this
non-GAAP
financial measure differently than other companies who report measures with the
same or similar names, and as a result, the
non-GAAP
measure we report may not be comparable.

Adjusted net income/(loss) represents our net income/(loss) excluding the change
in fair value of forward purchase agreement liabilities/assets and the change in
fair value of Outstanding Warrant liabilities, which are
non-cash
items. As of December 31, 2021, our balance sheets reflect a net liability of
$220,450,746 (net of Forward Purchase Agreement assets) (December 31, 2020:
$1,056,598,004) related to derivative liabilities/assets which do not impact the
funding available for an Initial Business Combination. As can be observed, the
value of the liabilities/assets relating to these instruments under GAAP (and
the related income/(loss) that flows through the statements of operations) can
swing significantly when in fact no economic changes have occurred.

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                                                                        For the Period from May 4,
                                           For the Year Ended            2020 (inception) through
                                           December 31, 2021                December 31, 2020

Net income/(loss)                                                                                   )
                                          $        833,301,124         $               (954,881,205
Less:
Change in fair value of Forward
Purchase Agreement liabilities                     598,782,500                         (593,893,320 )
Change in fair value of Outstanding
Warrant liabilities                                237,364,758                         (358,644,962 )
Offering costs allocable to
Outstanding Warrant liabilities                              -                             (912,625 )

Adjusted net loss                              $    (2,846,134 )                   $     (1,430,298 )

Cash and capital resources

Our liquidity needs had been satisfied prior to the consummation of the initial
public offering through a capital contribution of $25,000 by our Sponsor in
exchange for 100 shares of Class B Common Stock, and interest-bearing loans of
$1,121,120 from our Sponsor under an unsecured promissory note covering expenses
related to the initial public offering. The loan was repaid in full on July 24,
2020, inclusive of interest. As of December 31, 2021 and December 31, 2020,
$378,880 was left under the promissory note to be drawn down, and there were no
borrowings outstanding, respectively.

At July 24, 2020we completed the IPO of 200,000,000 Units, at $20.00 per unit, generating gross proceeds of $4,000,000,000. Simultaneously with the closing of the IPO, we carried out a
$67,837,500 sale of limited partners’ warrants and directors’ warrants in connection with private placements.

Following the initial public offering and the private placements of Sponsor
Warrants and Director Warrants, a total of $4,000,000,000 was placed into the
trust account. We incurred $94,623,187 in offering costs, including $35,000,000
of underwriting fees, $56,250,000 of deferred underwriting fees and $3,373,187
of other offering costs. The per share amount to be distributed to Public
Stockholders who properly redeem their Public Shares will not be reduced by the
deferred underwriting fees (further discussed below).

As of December 31, 2021, we had an unrestricted cash balance of $23,156,677 in
the operating account, held outside the trust account to fund our ongoing
expenses, as well as cash and marketable securities held in the trust account of
$4,002,943,971. Interest and dividend income earned on the balance in the trust
account will be used by us to pay taxes on such income. From our inception
through December 31, 2021, we withdrew $596,509 of interest and dividends earned
on the trust account to pay our income taxes, of which all were withdrawn during
the year ended December 31, 2021.

We intend to use substantially all of the funds held in the trust account,
including any amounts representing interest and dividends earned on the trust
account (less taxes payable and deferred underwriting fees), and the proceeds
from the sale of the Forward Purchase Units to complete an Initial Business
Combination. To the extent that our capital stock or debt is used, in whole or
in part, as consideration to complete the Initial Business Combination, the
remaining proceeds held in the trust account will be used as working capital to
finance the operations of the target business or businesses, make other
acquisitions, and pursue our growth strategies.

In order to fund working capital deficiencies or finance transaction costs in
connection with an Initial Business Combination, our Sponsor or an affiliate of
our Sponsor or certain of our directors and officers may, but are not obligated
to, loan us funds as may be needed. If we complete the Initial Business
Combination, we would repay such loaned amounts. In the event that the Initial
Business Combination does not close, we may use a portion of the working capital
held outside the trust account to repay such loaned amounts, but no proceeds
from our trust account would be used for such repayment.

We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimates of
the costs of identifying a target business, undertaking
in-depth
due diligence and negotiating our Initial Business Combination are less than the
actual amount necessary to do so, we may have insufficient funds available to
operate our business prior to our business combination. Moreover, we may need to
obtain additional financing either to complete our Initial Business Combination
or because we become obligated to redeem a significant number of the shares of
our Public Shares upon completion of our Initial Business Combination, in which
case we may issue additional securities or incur debt in connection with such
business combination. Subject to compliance with applicable securities laws, we
would only complete such financing simultaneously with the completion of our
Initial Business Combination. If we are unable to complete our Initial Business
Combination because we do not have sufficient funds available to us, we will be
forced to cease operations and liquidate the trust account. In addition,
following our Initial Business Combination, if cash on hand is insufficient, we
may need to obtain additional financing in order to meet our obligations.

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Contractual obligations

We have no long-term debt, obligations under capital leases or obligations under December 31, 2021.

The underwriters are entitled to a deferred fee of $0.28 per Unit, or
$56,250,000 in the aggregate payable only upon the completion of our initial
business combination. The aggregate deferred underwriting fees includes (i) the
deferral of any underwriting fees, other than the retail selling concessions, in
excess of $30,000,000 (a deferral of $12,500,000), plus (ii) a 2.0% rate applied
to the gross offering proceeds, subject to a $56,250,000 cap on the amount of
such aggregate deferred underwriting fees. If the amount of proceeds from the
trust account paid in connection with the redemption rights of Public
Stockholders, together with the amount of any capital raised in private
placements in connection with the Initial Business Combination from investors
other than Sponsor or its affiliates (the "Net Redemptions"), results in us
having less than $2,000,000,000 of cash available upon consummation of the
Initial Business Combination, only 25% of the aggregate deferred underwriting
fees will be payable. If such amount of cash available is $2,000,000,000 or
greater, 50% of the aggregate deferred underwriting fees will be payable, and
the remaining 50% of the aggregate deferred underwriting fees will be subject to
a
pro-rata
reduction based on the amount of Net Redemptions as a percentage of the total
public proceeds of the initial public offering. The deferred underwriting fees
will be waived by the underwriters solely in the event that we do not complete a
business combination, subject to the terms of the underwriting agreement.

Critical accounting policies

The preparation of financial statements and related disclosures in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:

Class A common shares redeemable

We account for our Class A Common Stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." The Company's conditionally redeemable Class A Common Stock features
certain redemption rights that are considered to be outside of its control and
subject to the occurrence of uncertain future events. Accordingly, at
December 31, 2021 and December 31, 2020, 200,000,000 shares of Class A Common
Stock subject to possible redemption were presented at redemption value as
temporary equity, outside of the stockholders' equity section of the Company's
balance sheets. The Company adjusts the carrying value of redeemable common
stock to equal the redemption value of the cash held in the Trust Account net of
income taxes payable at the end of each reporting period.

Warrants Outstanding and FPA Liabilities/Assets

We account for our Outstanding Warrants and FPA in accordance with the guidance
contained in ASC
815-40,
under which the Outstanding Warrants and FPA do not meet the criteria for equity
treatment and must be recorded as derivative liabilities or derivative assets.
Accordingly, we classify the Outstanding Warrants and FPA as liabilities or
assets with changes in fair value reflected on the Company's statements of
operations at each reporting period. The fair value of the Public Warrants was
initially measured using a modified Black-Scholes pricing model and subsequently
measured at the closing quoted market price. The Private Placement Warrants and
FPA are valued using a modified Black-Scholes pricing model. See Note 7 of the
Notes to Financial Statements included herein for further information on the
significant inputs to the models utilized to determine the fair values of the
Outstanding Warrants and FPA liabilities/assets.

Net earnings/(loss) per common share

We apply the
two-class
method of calculating earnings per share. Net income/(loss) per common share,
basic and diluted, for Class A Common Stock subject to possible redemption is
calculated by dividing the allocable income earned on the Trust Account, net of
applicable income taxes, by the weighted-average number of Class A Common Stock
subject to possible redemption outstanding for the period. Net income/(loss) per
share, basic and diluted, for Class B
non-redeemable
common stock is calculated by dividing the net income/(loss), adjusted for
income/(loss) attributable to Class A Common Stock subject to possible
redemption, by the weighted-average number of Class B
non-redeemable
common stock outstanding for the period.

Off-balance sheet

Leaf arrangements.

As of December 31, 2021, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K.

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Recent accounting statements.

Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material impact on
the Company's financial statements.

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