Social Capital Hedosophia Holdings VI is a bet on Chamath Palihapitiya

Social Capital Hedosophia Holdings Corp VI (NYSE:IPOF) is the sixth iteration of the SPAC series, superstar investor Chamath Palihapitiya is taking to the market. This shell company doesn’t have a target yet, which it has planned to be a large private technology company. Despite not having a target, IPOF stock is a bet on the track record of the King of SPACs.

A photo of wooden blocks that say SPAC on a folded newspaper.
Source: Dmitry Demidovich/ShutterStock.com

IPOF stock grew almost 10% in the past three months. However, in the past month, it has shed roughly 19% of its value. It currently trades at a roughly 14% premium to its redemption price of $10. This, in many ways, is refreshing considering how many SPACs have traded at parabolic levels before merging with their targets. Additionally, for a SPAC to trade so cheaply, considering a man of Chamath’s caliber leads it, is fantastic. Therefore, investors should seriously consider scooping up the stock at its current levels.

Chamath’s Solid Track Record

Sri Lankan-American venture capitalist Chamath Palihapitiya has spearheaded the SPAC-mania. His massive risk appetite has helped him raise billions by closing out several successful deals in the past few years. His goal has been to democratize finance so that it evens the field for regular investors. Therefore, the investing world dubs him as ‘the Warren Buffett of the Reddit era.’

The first SPAC he was involved with was known as Capital Hedosophia Holdings Corp. I. It later merged with Virgin Galactic (NYSE:SPCE), which is a company aiming to make space tourism a reality. Its stock has done extremely well, growing over 137% in the past year. His next SPAC was Social Capital Hedosophia Holdings Corp. II, which became Opendoor Technologies (NASDAQ:OPEN). Wall-street is bullish on the online real-estate company despite it having cooled off after its business combination.

Moving on, we have Social Capital Hedosophia Holdings Corp. III, which merged with Medicare Advantage insurer in Clover Health (NASDAQ:CLOV). Its stock has also been down since the merger but is being hailed by most analysts for its long-term potential. Social Capital Hedosophia Holdings Corp. IV (NYSE:IPOD) has raised over $400 million and is currently looking for a target in the technology sector.

Moreover, Social Capital Hedosophia Holdings Corp. V (NYSE:IPOE) announced it would be taking online personal finance company SoFi public. IPOE stock has blasted away in the past three months, growing by 76%. Finally, we have the Social Capital Hedosophia Holdings Corp. VI has raised $1.15 billion and is also searching for a target in the technology sector. Therefore, with such a wealth of experience and an incredible track record, I believe in Chamath.

Be Wary Of SPACs

I’ve talked about some of the risks of SPACs in the past, and I feel it’s time for a refresher. As my colleague Josh Enomoto very rightly points out, SPACs typically do not benefit retail investors. In most cases, you see that sponsors  get a significantly better cut from the deal. They get their money early and are rewarded handsomely regardless of whether the quality of the deal.

Recently, we have seen how Chamath has sold off his entire holding in Virgin Galactic. This beckons the question about whether SPAC sponsors like him are genuinely invested in their blank-check ventures.

Bottomline on IPOF Stock

IPOF stock doesn’t have a target but has the backing of a true juggernaut of the investing world. Those who believe in Chamath’s vision and past performance understand that the stock is hardly a speculative bet.  It should find a merger target soon and is likely to hit a home run again. Therefore, it’s best to grab IPOF stock when trading at a substantial discount as it is now.

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


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