Chamath Palihapitiya on Tuesday quietly announced on his blog that his firm Social Capital was winding down its two remaining ‘IPO 2.0’ special purpose acquisition companies (SPACs). The filings come shrouded in a somber, sober silence — being low-key isn’t a characteristic typically attached to the so-called ‘SPAC King.’
Palihapitiya was the loudest, most prolific SPAC guy. Many believe that he ushered in the SPAC boom, and even baptized the SPAC process as ‘IPO 2.0,’ alluding to it as a more improved vehicle for taking a company public. He once wanted to build SPACs with tickers from IPOA to IPOZ.
He got to IPOF before finally calling it a day.
In 2020, he partnered with British venture capitalist Ian Osborne and launched six SPACs including Social Capital Hedosophia Holdings Corp IV (NYSE: IPOD) which raised $460 million, and Social Capital Hedosophia Holdings Corp VI (NYSE: IPOF) with $1.15 billion, becoming his largest blank-check company. Per regulation, the SPACs have two years, in their case until October 14, 2022, to close a deal with a target, or they will need to return the money raised to their investors.
In August, the SPAC investor still tried to extend the deadline for another year, saying that there may not be sufficient time for the companies to “consummate” a business combination from the several opportunities they were evaluating.
He maintains this point in the wind-down announcement and said that they evaluated over 100 targets, but ultimately ended up walking away, citing valuation and volatility as the two reasons.
“Over the past two years, we evaluated more than 100 targets and while we came close to doing a deal several times, we ultimately walked away each time,” he wrote.
Closing down the two blank-check companies means he will need to return almost $1.6 billion to investors. It also almost effectively marks the end of the SPAC era. Interest among investors has also waned dramatically in the past year. In 2021 SPACs raised a total of $160 billion, this year SPACs have only raised about $13 billion so far, according to SPAC research.
Palihapitiya isn’t the first to throw in the towel either. In July, Bill Ackman wound down a $4 billion blank-check vehicle, the largest ever.
But IPOD and IPOF aren’t the SPAC King’s last remaining SPACs. He partnered with Suvretta Capital for a series of ‘Bio 2.0’ SPACs that focus on medical technologies and were given tickers starting with DNA. One of the SPACs (DNAA) recently took biotech company Akili Interactive public. DNAB and DNAD, meanwhile, are still looking for targets.
In his announcement, Palihapitiya wanted to stress that he isn’t just about SPACs.
“SPACs are just one of many tools in our toolkit to support companies as they enter subsequent stages of growth,” he wrote. We’ll see.
Information for this briefing was found via Twitter, and the sources and companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.