- The decision comes after the tech-focused blank check acquisition companies failed to find adequate merger targets.
Chamath Palihapitiya, the Sri Lankan American and Canadian billionaire investor will close two of his special purpose acquisition companies (SPACs) and return $1.5 billion to investors. “The decision comes after the tech-focused blank check acquisition companies failed to find adequate merger targets,” as reported by Axios. “It also comes as the overall SPAC market has struggled with shareholder redemptions, particularly from hedge funds, prior to merger closures,” it added.
Social Capital Hedosophia VI, labeled by Bloomberg as Palihapitiya’s “largest ever special purpose acquisition company which raised $1.15 billion,” and Social Capital IV, “which pulled in $460 million from investors,” will be shut down and give cash back to investors, according to regulatory filings. Last month, the two SPACs launched by Palihapitiya said they needed to push back the October deadlines they had set to make acquisitions, added Bloomberg.
“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 for a couple of reasons,” Palihapitiya said in a filing last week, according to Bloomberg. “Valuations and volatility were the two biggest barriers to closing deals,” he added in the filing.
However, these closures don’t mark the end for the “SPAC King.” Social Capital Suvretta Holdings Corp II and Social Capital Suvretta Holdings Corp IV — which are targeting companies in the health-care space — each raised $250 million and face deadlines in early July,” Bloomberg said. “Our view on SPACs remains consistent since our first deal – SPACs are just one of many tools in our toolkit to support companies as they enter subsequent stages of growth.”
A former Facebook executive, Palihapitiya, 46, who has often described himself as the Warren Buffett of the new generation, is CEO of Social Capital. The Menlo Park, California-based venture capital firm was founded in 2011 to invest in companies in fields being ignored by other venture capitalists, like health, financial services, and education. The firm has since expanded to also invest in tech companies like Amazon, Tesla, and Slack. In 2018, Palihapitiya closed his VC funds to new investors.
This February, he stepped down as chairman of Virgin Galactic’s board of directors. The SPAC took the space-tourism company public in October 2019. He was a pivotal figure in taking Virgin Galactic, a space travel company founded by British billionaire Richard Branson, public in 2019 via a SPAC, or special purpose acquisition company. He had stayed on as the company’s inaugural chairman since it went public. SPAC has no business operations and is formed only to raise capital through an initial public offering, capital that can then be used to buy out or merge with another company that is also trying to go public.
The resignation came barely a month after Palihapitiya made controversial comments on the persecution of ethnic Uyghurs in western China’s Xinjiang province. “Nobody cares about what’s happening to the Uyghurs, okay?” Palihapitiya said on Jason Carlacas’s podcast in January. “Of all the things I care about, yes it is below my line.”
Born in Sri Lanka, Palihapitiya moved with his family to Canada at age 6. He attended Lisgar Collegiate Institute and graduated at the age of 17. After graduating from the University of Waterloo in 1999 with a degree in electrical engineering, he worked for a year as a derivatives trader at the investment bank BMO Nesbitt Burns.
He moved to California to be with his then-girlfriend, Brigette Lau, and they later married. In 2018, he filed for divorce. He currently lives in California with his girlfriend Nathalie Dompe, an Italian pharmaceutical heiress and model.
A poker player of international repute, he has three World Series of Poker (WSOP) and two World Poker Tour (WPT) wins. In 2011, he finished 101st out of 6,865 entries in the World Series of Poker’s Main Event.