Just as Chamath Palihapitiya was the face of the SPAC frenzy that took over the financial markets earlier this year, today it is the face of the bust.
The six blank check companies linked to Hedosofia, Palihapitiya’s share capital, including three that have already completed mergers, have fallen more than the wider SPAC market since it peaked in mid-February. One of them – Virgin Galactic Holdings Inc., a space tourism business backed by Richard Branson, is down more than 50%. All these losses are higher than the average decrease of 23% in SPACs, measured by the IPOX SPAC index, during this time.
The collapse of special purpose acquisition companies – strange financial structures with a niche role in the markets before the recent boom – came as part of a broader cooling of speculative mania in the markets. Just a couple of weeks earlier, the fever of meme stocks had finally broken. Also, also, in pennies. Excess supply is part of what the SPACs were doing. Dozens of new deals, many of them coined by celebrities, hit the market every week.
Palihapitiya Plunge
King SPAC’s bids have dragged the market from the height
Source: Bloomberg
Days before the defeat began, Palihapitiya, a 44-year-old venture capitalist with a self-promoting style, proclaimed that he was about to be the Warren Buffett of his generation. “No one will listen to Buffett,” he said in a Feb. 8 Bloomberg report.Front Row ”interview. “But there have to be other people who take that mantle.”
Share capital did not respond to requests for comment.
To be fair, almost all of Palihapitiya’s SPACs have been in operation since it was released to the market.
Palihapitiya distanced itself from Virgin Galactic, the product of its first fusion. Downloaded shares of approximate value $ 213 million in March to fund what he said would be an upcoming investment to help combat climate change.
That sale came a month after he said he would only participate in shares of any of his SPACs in the rarest of circumstances.
“If I could really bet on it, I wouldn’t want to sell a portion of what I buy because I believe in it,” during the “Front Row” interview. “But every once in a while I run into liquidity restrictions, like everyone else.”
For Palihapitiya credit, only Clover Health Investments Corp is currently listed below its initial unit price of $ 10. His downfall came when the company said the Securities and Exchange Commission was examining a report accusing the health insurer of Misleading investors when it went public. Clover Health shares rallied Friday, gaining 20% as chat rooms and social media boards identified him as a potential candidate. short squeeze.
The Facebook Inc. executive he became himself the face of the SPAC renaissance. He raised more than $ 4 billion through blank check companies that used a small-scale personality to promote their investments and promote their financial experience on Twitter.
For investors who chose to line up with a Silicon Valley veteran in the midst of the frenzy over the group of celebrities, athletes and politicians who jumped into space, it has been the SPali of Palihapitiya that have been the worst bets. Its three open SPACs are in the lower 20th percentile for yields from the top spot in the market.