In this market, few stocks are doing well today. Most stocks are trending downward, as investors bemoan rising interest rates and a more aggressive Federal Reserve. However, investors in certain companies such as Social Capital Hedosophia Holdings VI (NYSE:IPOF) and IPOF stock are actually seeing positive price action today.
For IPOF stock, which is a Chamath Palihapitiya special purpose acquisition company (SPAC), this move is welcome. Indeed, IPOF stock has had a rather impressive run in recent weeks, moving to a premium of nearly 5% over its cash value. Less than a month ago, investors were able to scoop up shares of IPOF stock at their par value ($10 per share).
Interestingly, many SPACs and de-SPAC stocks have struggled in recent months. Much of this has to do with a mass investor rotation toward companies with real earnings and strong balance sheets. Most of the companies brought public via SPACs are early stage, and therefore more speculative. Additionally, in this environment of rising rates, fewer investors appear keen on owning such stocks.
However, there is a potential catalyst on the horizon for IPOF stock. Let’s dive into what investors are watching with this SPAC.
IPOF Stock Surges Higher on Down Day in Market
SPACs, otherwise known as blank check companies, are merger vehicles used to bring early stage companies public. These acquisition companies allow targets (those looking to go public) to do so quicker, and often with less regulatory scrutiny. Accordingly, aggressive growth investors have targeted SPACs as a way of “getting in on the ground floor” of various high-growth companies at an early stage.
The thing is, investors don’t know which company the SPAC will merge with. It’s a leap of faith. And while fellow InvestorPlace contributor Mark Hake suggests that Mr. Palihapitiya is worth betting on, many in the market don’t seem so sure.
After all, the target could be any company. In some ways, this can be a good thing. Speculation of late has centered on the idea that IPOF could be the vehicle to bring high-profile companies such as Starling, SpaceX, or other larger-cap private companies public. That’s because this SPAC is larger in size than many others in the market, and has an Oct. 14, 2022 deadline to bring a company public. Thus, in order for all the details to be worked out, many investors are doing the reverse math and suggesting an announcement is likely around the corner. An April announcement would allow six months for the next steps of the merger.
This is all speculation. However, there’s a reason for the speculation right now.
On the date of publication, Chris MacDonald 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.