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Wednesday 21 September 2022

Spacman falls to earth!

logoNo that’s not a typo. I’m alluding to Chamath Palihapitiya, founder of Silicon Valley private equity firm Social Capital_ (a misnomer if ever there was, with the added conceit of a trailing underscore character),  and a former VP at Facebook.

Besides his usual day job of backing companies playing to the various ‘themes du jour’, Palihapitiya launched two SPAC (special purpose acquisition company) platforms (Hedodphia and Suvretta, since you asked), each spawning several SPACs, ‘to provide an alternative growth path for companies to go public’.

First point. There should be no such thing as an ‘alternative path’ for companies to go public. You list in your own right or you stay private. What you shouldn’t do is piggy-back on someone else’s listed cash shell, bypassing normal stock exchange disclosures and scrutiny.

Second point. The only people pretty much guaranteed to make any money on a SPAC deal are the promoters and advisors.

So comes the news that Palihapitiya has been unable to find suitable (reverse) acquisition targets for two of his SPACs (‘IPOD’ and ‘IPOF’) and will return $1.5bn to investors. His previous SPAC ‘successes’ include Richard Branson’s Virgin Galactic (NYSE: SPCE) whose shares really did fall to earth from a $55 high and now trade at $5-and-a-bit, and a cluster of businesses in real estate, healthcare and moneylending, all of which now trade significantly below their launch price. You’ll be relieved to know, as was I, that the promoters in the SPCE SPAC got their money out way before the shares crashed.

In his blog post announcing the winddown, Palihapitiya said he was ‘proud of the companies [he] helped bring public... They are well positioned to bring innovation to each of their end markets over the next several years’. Should they last that long (of course he didn’t say that bit).

And in a final touch of irony, Palihapitiya wrote an article for Bloomberg back in May last year. Its title: SPACs need more oversight and regulation. Who’d have thought?

Posted by: Anthony Miller at 15:54

Tags: SPAC  

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