The technology investor who brought Richard Branson’s Virgin Galactic to public markets is trying to repeat the trick, seeking more than $1bn to acquire start-ups and take them public.
Chamath Palihapitiya, a former Facebook executive and early investor in Slack, laid out plans for second and third versions of his Social Capital Hedosophia companies on Friday in a regulatory filing.
The special-purpose acquisition companies, also known as “blank cheque” vehicles, aim to provide a back door to public markets for companies wishing to avoid the traditional initial public offering process. One of the vehicles is seeking to raise $345m for a US acquisition, while the other aims to secure $690m for an international target, according to filings.
“Our mission is to create an alternative path to a traditional IPO for disruptive and agile technology companies to achieve their long-term objectives and overcome key deterrents to becoming public,” Social Capital Hedosophia wrote in the filing.
The announcement follows roaring gains for Virgin Galactic, the human space flight company Mr Palihapitiya took public last year.
Investors have bid Virgin Galactic’s shares up more than 100 per cent since the listing but pulled back this week after the company reported widening losses in the fourth quarter. The company has yet to complete its first space tourism mission after signing up more than 600 reservations.
The new vehicles come as Silicon Valley investors seek alternative routes for companies to go public, with a growing backlog of mature tech start-ups weighing on venture capital portfolios.
Bill Gurley, a partner at the venture group Benchmark and early investor in Uber, last year organised a conference touting the benefits of the direct listing procedure used by Slack and Spotify, in which no new shares are sold.
The New York Stock Exchange has also submitted proposals to the Securities and Exchange Commission for companies to raise capital during direct listings.
Spacs have surged in popularity following a dip after the 2008 financial crisis, raising a record $13.4bn in the US last year, according to Dealogic data.
Last month, a blank cheque group organised by Daniel Loeb’s Third Point hedge fund agreed to a $2.6bn deal for the Swiss payments provider Global Blue, including a $350m injection from China’s Ant Financial.
Spacs can be risky for investors, in effect amounting to a bet on the dealmaking capabilities of top executives.
Mr Palihapitiya and his business partner, Hedosophia’s Ian Osborne, planned to begin a roadshow marketing the vehicles in mid-March and price shares near the end of the month, people familiar with the plans said.
The companies would go public on the same day and would have two years to find acquisitions or return money to investors.