The SPAC King Folds, Ending the Blank-Check Frenzy
Chamath Palihapitiya pioneered a new way of raising money. Now he’s giving $1.6 billion back, and his preferred investment vehicle looks increasingly like a passing fad.
Palihapitiya
Photographer: David Paul Morris/Bloomberg
In October 2020, Chamath Palihapitiya raised $2.4 billion from investors for three blank-check companies. He used a previously obscure financial vehicle known as a SPAC. All he had to do was find startups to buy, and he stood to make hundreds of millions of dollars. The Facebook-executive-turned-venture-capitalist loves high-stakes poker, and it looked as if he’d found a can’t-lose bet.
Other financiers agreed, and for two years it seemed as if anyone with some name recognition—including Shaquille O’Neal and Paul Ryan—had a SPAC. The same Reddit investors who made Dogecoin and GameStop Corp. soar earned huge returns by buying shares of almost any SPAC. Palihapitiya called it “IPO 2.0” and reserved the ticker symbols IPOA to IPOZ, one SPAC for each letter of the alphabet. In November 2020 he told Kara Swisher on her podcast that he was “all in.”