Billionaire investor Bill Ackman hopes to close his mega SPAC deal in a couple of weeks - and continues to hedge against inflation and a market downturn

• Bill Ackman hopes to close his huge SPAC deal in the next couple of weeks.
• The Pershing Square chief is hedging against inflation and a market correction.
• Ackman switched Starbucks stock for Domino's Pizza based on valuation and likely upside.
• See more stories on Insider's business page.

Billionaire investor Bill Ackman hopes to close his mega-SPAC deal in the next couple of weeks, continues to hedge against inflation and a potential market downturn, and swapped out Starbucks for Domino's Pizza in search of higher returns, he said on an earnings call this week.

Ackman's "blank-check" company, Pershing Square Tontine Holdings, floated last summer with the goal of spending about $5 billion for a minority stake in a private company and taking it public. The investor revealed earlier this month that he's been working to buy a piece of an "iconic, phenomenal, great business" since early November, and was close to sealing the deal.

"We've done our homework, we like the business, we love the management team, and we are working to complete a transaction," Ackman said this week. "Hopefully within a couple of weeks or so."

If the deal falls through, Ackman and his team will turn their attention to a second target, he added.

Ackman, who made a $2.6 billion profit by hedging the pandemic last spring, also weighed in on growing inflation fears and the steps he's taken to protect his portfolio. He pointed to multiple government-stimulus packages over the past year, and the prospect of pent-up demand being released and savings being spent as the economy reopens, as drivers of higher prices that could spur the Federal Reserve to hike interest rates. That represents a "risk for markets generally," he said.

The uncertain backdrop prompted his fund, Pershing Square Capital Management, to spend $157 million on interest-rate "swaptions" between December and early February. The position's value - which ballooned to almost $500 million by the end of March - is still up about 2.5 times, Ackman said.

The Pershing chief also elaborated on why his fund sold a 1% stake in Starbucks and snapped up more than 5% of Domino's - a position valued at about $750 million as of March 31 and $860 million today. The move was driven by price and potential upside, he said.

"We're always willing to trade an existing holding at a kind of full valuation for a business of similar quality at a much more attractive valuation," Ackman said. "That was the thinking behind the switch."

The investor and his team determined that Starbucks was likely to generate returns in the low double digits, while Domino's promises long-term returns in the high teens or low 20s, he added.