SPAC ‘King’ Chamath Palihapitiya Is Shuttering Two Funds

“SPAC Jesus calls it a day,” one widely followed short seller on Twitter wrote. 

Interest in special-purpose acquisition companies peaked in 1Q21 as boom times have been over for quite some time. A period of market turmoil led “SPAC King,” Chamath Palihapitiya, to begin winding down Social Capital Hedosophia VI and Social Capital IV, after failing to find companies to take public.

The two SPACs raised $1.15 billion and $460 million, respectively, but last month had indicated via filings that they needed to push back dates to make acquisitions. Ultimately, none ever came to fruition. 

“Today, we started the process of winding down IPOD and IPOF,” Palihapitiya wrote on Substack. 

He said, “funds raised by IPOD and IPOF will be returned to their respective shareholders,” adding his team “evaluated more than 100 targets, and while we came close to doing a deal several times, we ultimately walked away each time.” 

Palihapitiya outlined valuation concerns and volatility as some of the reasons why his team couldn’t go ahead with finding a suitable target for IPOD and IPOF:

Valuation. A combination of factors made it very difficult to find a company at a reasonable valuation and margin of safety. Ultimately, to get a deal done would have required us stretching on price or buying an inferior asset – neither were things we felt comfortable doing.

Volatility. We saw resistance from management teams who either weren’t prepared for or didn’t want to face the public markets in the face of the current volatility.

Palihapitiya said he was proud of the companies he brought to public markets via SPACs, including Virgin Galactic, Opendoor, Clover Health, SoFi, ProKidney, and Akili. 

We’re not sure how one can be “proud” of so-called SPAC ‘pump and dumps’ such as Virgin Galactic…

Remember, in May 2021, we said Palihapitiya will “likely be seen as the face of a SPAC bubble that looks as though it is in the process of popping.” 

Looking at the IPOX SPAC Index, the bubble popped in February 2021 and has since been deflating. 

Given where SPAC shares trade now and the Federal Reserve’s hawkishness to remove market froth, it becomes increasingly clear why Palihapitiya is shuttering two SPACs: boom times are over.