Investors Ought to Buy All Six Social Capital SPACs  

It’s been a little over two months since Opendoor announced its merger with Social Capital Hedosophia Holdings Corp. II (NYSE:IPOB). IPOB stock is up 50% since the announcement through Nov. 20. 

a large house has a For Sale sign out front
Source: Shutterstock

Thinking outside the box, I believe adventurous investors ought to consider buying all six of venture capitalist Chamath Palihapitiya’s special purpose acquisition companies, otherwise known as SPACs.   

Here’s why. 

Palihapitiya’s Canadian

In October 2016, the Sri Lankan-born, Canadian-raised venture capitalist tweeted how proud he was to be Canadian. We Canadians have got to stick together. 

I first came to want to know more about Palihapitiya earlier this year when he went on a rant about why the federal government shouldn’t bail out hedge fund billionaires.  

“On Main Street today, people are getting wiped out. Right now, rich CEOs are not, boards that have horrible governance are not. People are,” Palihapitiya said on CNBC in April. 

“What we’ve done is disproportionately prop up poor-performing CEOs and boards, and you have to wash these people out.”

I don’t spend a lot of time following the inner workings of Silicon Valley, so I was like, “Who is this guy, and boy does he have chutzpah.”

I then listened to an NPR podcast he appeared on discussing his comments and immediately wanted to know more about him.

It turns out he went to high school in Ottawa, and post-secondary studies at the University of Waterloo, just an hour’s drive southwest of Toronto. He spent some time at AOL and Facebook (NASDAQ:FB) before starting his own fund in 2011. 

Interestingly, he has owned a piece of the NBA’s Golden State Warriors since 2011. I’m pretty sure if his Warriors had to lose to any team in the 2019 NBA Championship, he would have said the Toronto Raptors, who ultimately won the 4-2.  

Virgin Galactic Merger

The fact that Palihapitiya is Canadian is a big deal. Very few Canadians make it this big in the investment world, 

However, his first SPAC merger with Virgin Galactic (NYSE:SPCE) in October 2019 has me recommending investors buy all six of his SPACs.

In September 2017, Social Capital and U.K.-based Hedosophia Group sponsored Social Capital Hedosophia Holdings Corp., raising $600 million from investors, so that it could go out and find a target company to merge with. 

Two years later, it hooked up with Richard Branson and Virgin Galactic. Soon, it will make commercial space flight a normal part of everyday life, and in the process, SPCE shareholders, very rich. 

I consider SPCE to be one of the best speculative buys on any U.S. stock exchange. 

IPOB Stock Pops

IPOB, Social Capital Hedosophia’s second SPAC, announced it was merging with Opendoor, a digital platform that buys and sells homes in 21 markets across the U.S.  

My InvestorPlace colleague, Luke Lango, believes that Opendoor is the Amazon (NASDAQ:AMZN) of residential real estate, arguing that with less than 0.1% of the homes sold in the latest quarter transacted online, the upside is exponentially high

As Luke says, first-mover advantage is critical to its future success. 

“Opendoor is a $100+ billion ‘Amazon of houses’ in the making, and an early stage investment in IPOB stock today could generate life-changing wealth over the next decade,” Lango stated in late October.  

I would tend to agree. So, too, would star portfolio manager Catherine Wood. Her ARK Fintech Innovation ETF (NYSEARCA:ARKF) currently owns IPOB stock and 47 other fin-tech disruptors. 

In fact, Lango’s future estimate of a $100+ billion market capitalization in the future could be very low. 

Palihapitiya made two good moves in a row. 

The remaining four SPACs (IPOC, IPOD.U, IPOE.U, and IPOF.U) have raised $2.8 billion in IPO capital in 2020. All four have plenty of time to find a target combination. 

Bottom Line

If you buy these four stocks that haven’t found a merger candidate, you’re not putting any capital at risk, as the funds raised are held in trust until a deal is voted on and consummated. 

So, the downside on all four is minimal, but the upside given Palihapitiya’s track record before SPAC fever is excellent. 

As for the two transactions that have been completed to date, I like them both. 

All six ought to be a buy for adventurous investors.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


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