Billionaire investor Bill Ackman stated on Thursday that the sudden decline in the share price of his newly launched closed-end fund, Pershing Square USA, on its first day of trading was caused by retail investors selling immediately after the fund began trading.

In an interview, Ackman noted that shortly after its debut on the New York Stock Exchange, the fund dropped from its issue price of $50 to $42, a 16% decline, which he described as "almost entirely driven by retail trading." He pointed out that many small investors who received allocations through retail brokers such as Robinhood and Charles Schwab chose to take profits on the first day rather than hold for the long term.

"We aimed to democratize capitalism, allowing even those with just $50 to become long-term shareholders," Ackman said. "However, it appears some retail investors did not fully grasp the structural characteristics of closed-end funds and sold immediately upon seeing the price rise."

Data showed that PSUS eventually closed at $40.90, down 18.2% from its issue price. Meanwhile, asset management firm Pershing Square Inc., which listed simultaneously, closed at $24.20, showing relatively stable performance.

To attract retail investors, Ackman designed a unique incentive scheme: for every five shares of PSUS purchased, investors receive one free share of PS. Ackman explained that this "buy five, get one free" structure was intended to make investors owners of the management company as well, incentivizing long-term holding.

Despite the weak first-day performance, the combined IPO raised $5 billion, making it the largest closed-end fund listing in U.S. history. Ackman expressed confidence in the fund's long-term performance and plans to deploy the raised capital into existing holdings, including Uber and Meta, in the coming weeks.