Chamath Palihapitiya Liquidating 2 SPACs: Are Dreams Of Creating The Next Berkshire Hathaway Over?

Known by many as the SPAC King, Chamath Palihapitiya was one of the biggest names associated with the growing number of blank check companies taking private companies public. When SPACs were hot with the market, Palihapitiya was loved by investors and companies.

Years later, Palihapitiya has been less active in SPACs. An announcement Tuesday could see Palihapitiya face more criticism and continue to put a negative spotlight on SPACs.

What Happened: Chamath Palihapitiya announced Tuesday that two SPACs he launched are liquidating.

“Over the past two years, we evaluated more than 100 targets and while we came close to doing a deal several times, we ultimately walked away each time for a couple of reasons,” Palihapitiya said.

The entrepreneur and investor cited valuation and volatility as the two biggest reasons that deals were not reached with the SPACs.

“To get a deal done would have required us stretching on price or buying an inferior asset — neither were things we felt comfortable doing.”

Palihapitiya also said management teams were resistant to go public given the current volatility of the markets.

SPACs Social Capital Hedosophia Holdings Corp IV IPOD and Social Capital Hedosophia Holdings Corp VI IPOF will both liquidate. The stocks will liquidate with a net asset value expected at $10.01 to current shareholders. The liquidation date in the filings was listed as Oct. 14, 2022. Redemptions are expected to be completed on Oct. 17, 2022.

Warrants for both SPACs will expire worthless.

“Looking back, I am proud of the companies we helped bring public — Virgin Galactic, Opendoor, Clover Health, SoFit, ProKidney and Akili. They are well positioned to bring innovation to each of their end markets over the next several years, and I am proud we were able to have played a role in each of their respective journeys.”

Related Link: SPAC King Chamath Palihapitiya On Facebook, Tesla And Bitcoin

Why It’s Important: Palihapitiya had grand plans for the SPAC markets, originally stating he had filed to list SPACs with tickers IPOA to IPOZ on the public market.

“Looking ahead, our focus remains on investing in big ideas at the early stage. Our view on SPACs remains consistent since our first deal — SPACs are just one of many tools in our toolkit to support companies as they enter subsequent stages of growth,” Palihapitiya said.

Two remaining Palihapitiya-launched SPACs remained public searching for targets in the biotech space: Social Capital Suvretta Holdings Corp II DNAB and Social Capital Suvretta Holdings Corp IV DNAD.

In addition to bringing several companies public via SPAC merger, Palihapitiya invested in SPAC deals via the PIPE, or private investment in public equity.

“My ambition is to be our generation’s Berkshire Hathaway. It’ll be a Berkshire, a holding company that, instead of holding Gillette and Coca-Cola and McDonald’s will hold technology businesses,” Palihapitiya said in 2020.

The investor said he hoped to fulfill that vision with SPAC deals, citing the need for more private companies to go public with around 4,000 companies now public on American exchanges as compared to 8,000 in 2000.

Last month, Benzinga shared an updated look at the market returns of Palihapitiya’s SPACs he founded and supported with PIPE financing.

The article tracked 18 SPACs with 10 coming from Palihapitiya and eight PIPE deals. Tracked from an initial price point of $10 to Aug. 17, 2022, the returns were:

18 Total SPAC deals: -22.7% average

10 Palihapitiya-led SPACs: -21.2% average

6 Palihapitiya-led SPACs with deals: -34.6% average

8 PIPE deals: -17.0% average

IPOD, IPOF Price Action: Social Capital Hedosophia Holdings Corp IV shares traded at $10.01 Tuesday at publication, versus a 52-week range of $9.77 to $10.61.

Social Capital Hedosophia Holdings Corp VI shares trade at $10 Tuesday at publication, versus a 52-week range of $9.80 to $10.99.

Both SPACs traded at more than $15 in late 2020.

Photo: Christopher Michel via Flickr Creative Commons