Chamath Palihapitiya is getting more than his 15 minutes. His Social Capital, originally a venture capital fund, has combined with Hedosophia of England to create six special purpose acquisition companies (SPACs), so far.
I’m not a fan. But the stock’s gains were real, and they made Palihapitiya a big reputation. His net worth was recently estimated at $1 billion.
SPACs Beyond SPCE Stock
Since Virgin Galactic, Palihapitiya, who was born in Sri Lanka and moved to Canada at age six, has delivered two other willing companies to the public market. IPOB became Opendoor Technologies (NASDAQ:OPEN), which so far this year is up 1.36%. IPOC became Clover Health Investments (NASDAQ:CLOV), a Medicare services provider now down over 50% after short seller Hindenburg Research popped its balloon.
Another IPO SPAC, Social Capital Hedosophia V (NYSE:IPOE), is taking SoFi, an online bank and brokerage, public. I like SoFi, on the strength of its business model and the purchase of a real bank in Sacramento. If all his investments were like SoFi, I’d be a Palihapitiya fan.
Even with two of his current SPACs unspoken for, Palihapitiya has filed to create seven more, which will get him halfway through the alphabet. He has promised to use the whole thing, after which, what, Greek?
Palihapitiya hasn’t just made money on these deals. He has gained celebrity. His interview on CNBC last year, where he came across as the small investor’s friend, was followed by his pushing GameStop (NYSE:GME) and, more recently, Bitcoin.
Chamath Behind the Charm
Chamath Palihapitiya got his start at America Online. He made his first fortune as an early executive with Facebook (NASDAQ:FB), before he left in 2011. He then ran Social Capital as a venture fund until 2018 when it was converted into a personal fund.
Palihapitiya enjoys his celebrity, which he uses to talk about issues like housing, immigration reform, and how Wall Street is ripping off small investors.
Besides claiming to be a man of the people, Palihapitiya also says he’s an environmentalist. He has talked up a $1 billion climate fund , later described in a tweet as an investment in residential solar. This commitment is belied by his love of Bitcoin, which consumes more energy than Argentina, much of it by burning coal.
After touting Virgin Galactic for a year as its chairman, Palihapitiya sold out his personal stake in the company. The Hindenburg report on Clover alleges enormous self-dealing, although Hindenburg itself has taken no position on Clover stock.
The Bottom Line
Every era has its Gatsby and Chamath Palihapitiya may be ours. (The Great Gatsby entered the public domain at the start of 2021.) As F. Scott Fitzgerald wrote, “Gatsby believed in the green light, the orgastic future that year by year recedes before us.” That could be describing Palihapitiya.
Chamath Palihapitiya is a promoter, a salesman, a Music Man who may or may not know the territory. He once told a reporter that the SPAC game was as simple as him going on CNBC and talking about it.
SPACs can cut the cost of going public. They can take power out of Wall Street and give it to venture funds looking to cash out deals. They will go on long after Chamath Palihapitiya and, like all promoters, he’s flying close to the Sun right now.
At the time of publication, Dana Blankenhorn directly owned shares in FB.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack newsletter.
