Time is running out for Chamath Palihapitiya’s special purpose acquisition company (SPAC) Social Capital Hedosophia Holdings (NYSE:IPOF) to find a partner and complete a deal.
Palihapitiya’s company has a deadline of Oct. 14 to find a dance partner or it might be forced to return capital to investors. While there was initial excitement generated by a new potential SPAC deal from Palihapitiya, who previously worked at Facebook’s parent company Meta Platforms (NASDAQ:META), concerns are growing that a reverse merger may not happen as investor appetite for SPACs wanes amid the market downturn.
Currently, IPOF stock is trading at $10.04 a share, down 3% on the year.
What Happened
While speculation continues to swirl on social media, to date Chamath Palihapitiya has not announced any acquisition target for Social Capital Hedosophia Holdings, raising the prospect that the SPAC might be forced to return the $1.15 billion it has raised from investors.
Palihapitiya would not be the first fund manager to shut down a SPAC and return money to investors this year. In July, Bill Ackman’s Pershing Square Tontine Holdings (NYSE:PSTH) announced that it would wind down its latest SPAC and return $4 billion to investors, citing poor market conditions as the reason for the cancellation.
Why It Matters
Palihapitiya’s Social Capital Hedosophia Holdings appears to be the latest high-profile casualty in the SPAC wreck. The entire SPAC market has crashed this year after robust deal-making in 2021. Last year, there were 613 SPAC initial public offerings (IPOs) valued at more than $160 billion. By April of this year, only 10 SPACs were undertaken, according to data from SPAC Research. There is also reportedly a glut of more than 700 SPAC companies looking for acquisition targets currently.
SPAC companies that have gone public in recent years are not faring well either, with at least seven SPACs that launched in 2020 at the depths of the pandemic forced to liquidate their investments this year. The De-SPAC exchange-traded fund (ETF) that tracks 25 of the largest SPAC stocks is down nearly 60% this year and trading at $7.93 a share.
What’s Next for IPOF Stock
A volatile stock market and souring investor sentiment towards SPAC deals that were all the rage on Wall Street a year ago is jeopardizing Chamath Palihapitiya’s latest deal. With a month to go until a deadline is reached on his Social Capital Hedosophia Holdings blank check company, pressure is mounting for him to find a company to acquire and take public via a reverse merger. Failure to do so could be the latest blow to the troubled SPAC sector.
On the date of publication, Joel Baglole 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.
