Shares of special purpose acquisition company (SPAC) Social Capital Hedosophia VI (NYSE:IPOF) are falling back to their initial public offering price of $10 after Chamath Palihapitiya announced that he would return all funds to IPOF stock holders.
Palihapitiya explained his team evaluated more than 100 potential targets, but they ultimately stepped away due to two reasons. The first reason was valuation. He noted there were several interesting targets, although a deal “would have required us stretching on price or buying an inferior asset.”
The second reason was the volatile state of the market. Several company’s management teams were hesitant to go public in a downturn year ravaged by inflation, interest rate hikes and supply chain issues.
IPOF Stock Fails to Find a Target
Now, IPOF is set to return capital to its shareholders by Oct. 14, the deadline to find a target. Furthermore, it seems the hype around SPACs has cooled off. Palihapitiya isn’t alone, though. More than 600 SPACs that hold a combined $174 billion are nearing deadlines to find a target over the next 16 months. These may find a fate similar to IPOF if no target is found.
On the other hand, the billionaire investor found success with some of his other SPACs. He successfully took companies like Opendoor (NASDAQ:OPEN), SoFi (NASDAQ:SOFI) and Clover Health (NASDAQ:CLOV) public. Still, all three of these companies are down by more than 40% year-to-date (YTD), with OPEN having the greatest YTD loss of 75%. The large losses on these former SPACs may have scared off potential targets of IPOF.
Palihapitiya noted his opinion on SPACs has remained unchanged since his first deal was signed. He views them as “just one of many tools in our toolkit to support companies as they enter subsequent stages of growth.”
In the meantime, Palihapitiya will focus on targets for his two remaining Bio 2.0 SPACs. Four Bio 2.0 SPACs were launched, while two have already found targets in the form of ProKidney (NASDAQ:PROK) and Akili (NASDAQ:AKLI). In an earlier interview, he disclosed that Social Capital had made $750 million from SPACs, roughly doubling their initial investment.
On the date of publication, Eddie Pan did not hold (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.
