Not long ago, Chamath Palihapitiya could be called the Jim Cramer of SPACs.
A Facebook executive turned venture capitalist, Palihapitiya talked up the special purpose acquisition companies — shell entities that provide companies a backdoor entry to public markets — to everyday investors with the same fervor that Cramer has long pitched stocks on television, The New York Times reports.
Palihapitiya found an eager audience in 2020, when millions of people were stuck at home during the pandemic lockdowns, flush with stimulus checks and looking for new excitements. He launched 10 SPACs — one before the pandemic and nine since. He promoted several on CNBC and social media platforms as a path to riches for small investors. From 2019 to early 2021, his Twitter following swelled from 147,000 to more than one million.
Palihapitiya was the “evangelist and the apostle of SPACs,” said Usha Rodrigues, a professor at the University of Georgia School of Law. “He was spreading the word and getting the attention. For a while it felt like he had the Midas touch.”
The Federal Reserve’s sharp interest rate increases have made such speculative betting less enticing for big investors, who can now get higher returns from safer assets.
In recent months, some of the stocks of Palihapitiya’s SPACs have dropped nearly 90 percent from when they listed. By selling most of his shares early, he roughly doubled the $750 million he put in, mostly into the entities he backed. But many small investors who followed his advice may not fare so well. Read more.
