Spac augmented Chamath Palihapitiya throws in the towel

Chamath Palihapitiya, one of the biggest proponents of special purpose buyouts, has thrown in the towel, returning $1.5 billion to investors after they failed to find targets.

The former Facebook CEO, who once called himself the Warren Buffett of his day, said two of his cars would be liquidated, and blamed valuations and fluctuations for his inability to find deals.

Spacs are publicly traded vehicles that raise money and then seek to acquire private companies. They launched as an alternative to a traditional initial public offering but the market has plummeted this year as investors shy away from riskier businesses.

“Over the past two years, we have evaluated more than 100 targets, and while we came close to a deal multiple times, we eventually pulled out each time for a couple of reasons,” Palihapitiya said in a regulatory filing.

Palihapitiya became the face of the blank check companies boom, partnering with British venture capitalist Ian Osborne to launch several Spacs as the market took off. He used Twitter to promote his deals and rally retail investors who saw a way to reach public companies that often had no revenue or even product.

Social Capital Hedosophia, which combined the name Palihapitiya venture capital firm with Osborne’s own business, named after the Greek goddess of pleasure and wisdom, launched six Spacs in total.

The first deal, with Richard Branson’s Virgin Galactic, set the tone for the kind of goals that blank check companies would pursue — early businesses that made great promises to revolutionize their industry, or even the world.

Shares in the space travel venture soared to $55, allowing Branson and Palihapitiya to sell the company and make hundreds of millions of dollars before the stock collapsed to about $5.

Other companies that Palihapitiya has helped bring to the public, including real estate group Opendoor, Clover Health, a healthcare company, and online lender SoFi, are all trading for less than $10, the price at which Spac investors are buying.

“Looking back, I’m proud of the companies we helped popularize,” Palihapitiya wrote in a letter to the Securities and Exchange Commission. “They are well positioned to bring innovation to each of their end markets over the next several years, and I am proud that we have been able to play a role in each of their journeys.”

Palihapitiya deals were often followed up with great grit on Twitter as he presented himself as someone who wanted to help retail investors despite his billionaire status. He was a strong proponent of having “skin in the game” as a sponsor of Spac using his own money to set up vehicles.

Earlier this year, the Financial Times reported that Palihapitiya had borrowed money from Credit Suisse to fund two of its signature deals – Virgin Galactic and Opendoor. When asked by the Financial Times in 2020 if he had secured a loan to fund his $100 million investment in Virgin Galactic, Palihapitiya denied that it was, writing: “It’s not true.”

Video: Why So Many Spacs May Be Left With No Deals

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