Just as Chamath Palihapitiya was the face of the SPAC frenzy that gripped financial markets at the start of the year, today he is the face of failure.
All six of Palihapitiya’s Social Capital Hedosophia-linked blank check companies, including three that have already completed mergers, have been more submerged than the broader SPAC market since its peak reached in mid-February. One of them — Virgin Galactic Holdings Inc., a space tourism company backed by Richard Branson, is down more than 50%. All of these losses are greater than the average 23% drop in SPACs, as measured by the IPOX SPAC Index, during that time.
The collapse of special acquisition companies – Eccentric financial structures with a niche role in markets before the recent boom – emerged as part of a broader cooling of speculative madness in markets. Just a few weeks earlier, the fever in the meme stock had finally broken. So also in penny stocks. Too much supply is part of what SPACs did. Dozens of new deals – many of which were hit by celebrities – hit the market every week.
Palihapitiya dive
SPAC king’s offering has been following the market since its peak
Source: Bloomberg
Days before the defeat began, Palihapitiya, a 44-year-old venture capitalist with a flair for self-promotion, announced that he was ready to become the Warren Buffett of his generation. “No one will listen to Buffett,” he said in Bloomberg on Feb. 8.Front Row ”interview. “But there must be other people who take that mantle.”
Social Capital did not respond to requests for comment.
To be fair, almost all of Palihapitiya’s SPACs are still running since their market debut.
Palihapitiya distanced himself from Virgin Galactic, the product of his first merger. He discharged shares worth approx $ 213 million in March to fund what he believes would be an upcoming investment to help combat climate change.
That sale came a month after he said he would only relinquish shares in one of his SPACs in the rarest of circumstances.
“If I could really go for it, I wouldn’t sell part of everything I buy because I believe in it,” during the “Front Row” interview. “But every now and then I run into liquidity constraints, just like everyone else.”
To the honor of Palihapitiya, simply Clover Health Investments Corp. currently trades below the original unit price of $ 10. The fall was triggered when the company said the Securities and Exchange Commission was investigating a report accusing the health insurer of misleading investors when it went public. Clover Health stock came together on Friday and gained 20% as chat rooms and social media boards identified it as a candidate for a potential Short press.
The former Facebook Inc. made himself the face of the SPAC renaissance. He raised more than $ 4 billion through blank check companies that used too much of a personality to promote his investments and promote his financial knowledge on Twitter.
For investors who chose to join a Silicon Valley veteran at the height of a frenzy over the cadre of celebrities, athletes and politicians leaping into space, it was Palihapitiya’s SPACs that were among the worst of gambling. Its three open SPACs are all in the bottom 20th percentile for returns since the top of the market.