(Bloomberg) – Just as Chamath Palihapitiya was the face of the SPAC frenzy that gripped the financial markets at the beginning of the year, he is today the face of the bust.
All six of Palihapitiya’s blank check companies linked to Social Capital Hedosophia, including three that have already completed mergers, have fallen more than the broader SPAC market since peaking in mid-February. One of these – Virgin Galactic Holdings Inc., a space tourism industry backed by Richard Branson – is down more than 50%. All of these losses are greater than the average 23% drop in SPACs, measured by the IPOX SPAC index, during that time.
The collapse of special-purpose companies – foreign financial structures with a niche role in markets before the recent boom – comes as part of a broader cooling of speculative mania in markets. Only a few weeks earlier, the fever in meme stocks had finally broken. So too in penny stocks. Too much supply is part of what SPACs have done. Dozens of new deals – many of which were sunk by celebrities – hit the market every week.
Days before the trail began, Palihapitiya, a 44-year-old venture capitalist with a penchant for self-promotion, declared he was ready to be the Warren Buffett of his generation. “Nobody’s going to listen to Buffett,” he said in a Feb. 8 interview. “But there must be other people taking the mantle.”
Social Capital did not respond to requests for comment.
To be honest, almost all of Palihapitiya’s SPACs are still there since their market debuts.
Palihapitiya distances himself from Virgin Galactic, the product of his first merger. He dropped shares worth about $ 213 million in March to finance what he said would be an upcoming investment to fight climate change.
The sale took place a month after he said he would only share shares in any of his SPACs in the rarest of circumstances.
“If I could really just work for it, I would not sell a portion of anything I buy because I believe in it,” during the ‘Front Row’ interview. “But every now and then I run into liquidity constraints, like everyone else.”
In honor of Palihapitiya, only Clover Health Investments Corp. trades below the initial price of $ 10. Its fall occurred when the company said the Securities and Exchange Commission was investigating a report accusing the health insurer of misleading investors did when it became known. Clover Health’s shares rose Friday, reaching 20% because chat rooms and boards on social media see it as a candidate for a possible short press.
The former manager of Facebook Inc. made himself the face of the SPAC renaissance. He has raised more than $ 4 billion via blank check businesses with an extraordinary personality to boost his investments and address his financial skills on Twitter.
For investors who chose to join a veteran from Silicon Valley at the height of a frenzy over the group of celebrities, athletes and politicians who jumped into space, it was the Palihapitiya’s SPACs that were the worst bet. Its three open SPACs are all in the bottom 20th percentile for returns since the market.
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