Just as Chamath Palihapitiya was the face of the SPAC frenzy that engulfed the financial markets earlier this year, he is today the face of the bust.
All six Palihapitiya-related Hedosophia-linked social capital companies, including three that have already completed mergers, have fallen more than the broader SPAC market since it peaked in mid-February. One of them — Virgin Galactic Holdings Inc., a space tourism business backed by Richard Branson, fell more than 50 percent. All these losses are higher than the average decrease of 23% of SPACs, measured by the IPOX SPAC index, at that time.
The collapse of special purpose procurement 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 few weeks earlier, the fever in meme stocks finally broke. The same goes for penny stocks. Too much offer is part of what the SPACs were doing. Dozens of new offers – many created by celebrities – hit the market every week.
Palihapitiya Plunge
The offers of King SPAC followed the market from the top
Source: Bloomberg
A few days before the wandering began, Palihapitiya, a 44-year-old venture capitalist with a flair for self-promotion, proclaimed that he was ready to be Warren Buffett of his generation. “No one will listen to Buffett,” he told a Feb. 8 Bloomberg report.Front Row ”interview. “But there must be other people who take this cloak.”
The share capital did not respond to requests for comment.
To be fair, almost all Palihapitiya SPACs are still in operation since their market launch.
Palihapitiya distanced itself from Virgin Galactic, the product of its first fusion. He downloaded shares worth about $ 213 million in March to fund what he said would be a future investment to help fight climate change.
The sale came a month after he said he would only participate in shares in any of his SPACs in the rarest of circumstances.
“If I could go, I wouldn’t sell part of everything I buy because I believe in it,” during the “Front Row” interview. “But from time to time, I face liquidity constraints, like everyone else.”
To Palihapitiya’s credit, only Clover Health Investments Corp. currently trades below its initial price of $ 10. His downfall came when the company said the Securities and Exchange Commission was considering a report accusing the health insurer of misleading investors when it became public. Clover Health shares rallied on Friday, gaining 20%, as chat rooms and social boards identified him as a candidate for a potential squeeze short.
Former Facebook Inc. executive he made himself the face of the SPAC renaissance. He has raised more than $ 4 billion through empty check companies that use outdated personalities to promote their investments and promote their financial knowledge on Twitter.
For investors who chose to line up with a Silicon Valley veteran at the height of a frenzy over celebrities, athletes and politicians who jumped into space, it was the Palihapitiya SPACs that were among the worst bets. Its three open SPACs are in the lower 20th percentile for profitability at the top of the market.