Shares of Reinvent Technology Partners (NYSE:RTP) are falling further below the “magic” $10 level in premarket trading on Tuesday following reports that most of the investors in the special purpose acquisition company (SPAC) have asked for their money back. RTP stock target insurtech Hippo (NYSE:HIPO) is slated to begin trading today.
According to reports in Israeli business daily Calcalist, more than 80% of the capital raised by the SPAC was pulled, and $192 million was returned to investors. The report claimed only 19.2 million shares out of the 23 million shares issued were sold, raising only $550 million.
Reinvent, backed by LinkedIn founder Reid Hoffman and Zynga (NASDAQ:ZNGA) founder Mark Pincus, raised $690 million in its September 2020 initial public offering (IPO). Hippo, an Israeli insurtech, was valued at $3 billion in November after two investments totaling $500 million.
Hippo sells homeowners insurance online. It emerged out of the Tel Aviv startup ecosystem that produced Lemonade (NYSE:LMND), which held its IPO in July. RTP stock pushed above the $15-a-share level in February following the announcement of the tie-up.
Weeks later, RTP stock jumped again following reports that the SPAC would also merge with Joby Aviation, a transportation company currently developing an all-electric, vertical take-off and landing aircraft.
HIPO Stock Starts Public Life Today
Under the plan to bring HIPO stock to the public markets, the insurtech company was originally due to receive $230 million from funds raised by the SPAC in September 2020 along with another $550 million raised from institutional investors in the private investment in public equity (PIPE) portion of the deal. Hippo is still slated to start trading at a value of $5 billion.
In the announcement from the two firms on the combination’s completion, Hippo was described as “a well-capitalized public company” despite the shortfall in investor cash. It made no specific reference to the difference.
Most SPACs are structured so that investors get a single share plus a warrant at a typical IPO price of $10 a share. They trade in a fairly narrow range, often popping higher on news of a merger plan, only to settle back to the $10 level until the transaction is completed and the target comes public. In this case the two units are HIPO stock and the warrants, trading under the ticker ‘HIPO.WS.’
The past year and a half has seen SPACs raise nearly $200 billion — a boom that has drawn increased regulatory scrutiny. A number of startups that have either merged with blank check companies or announced merger plans have revealed investigations by the Securities and Exchange Commission (SEC) as it looks into potential abuses in the SPAC world, The New York Times reported last month.
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, including previous stints with Bloomberg News and as a buyside equity research editor.