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Here's What's Next for Chamath Palihapitiya's Social Capital SPACs

By Keith Speights - Jan 23, 2021 at 2:00PM

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Hint: There's going to be a lot of new alternatives for investors.

Chamath Palihapitiya's Social Capital has already created several special purpose acquisition companies (SPACs), including the latest -- Social Capital Hedosophia Holdings Corp. VI (IPOF 0.00%). But what's next? In this Motley Fool Live video recorded on Nov. 16, 2020, Tom Gardner, co-founder and CEO of The Motley Fool, talks with Palihapitiya about his vision of the future for Social Capital and what new SPACs could be coming.

Tom Gardner: Awesome. In the home stretch here of our conversation, we want to talk a little Social Capital, and then a little bit of investing in life. Chamath, when you look at the collection of companies that you are connected with now on IPO A, B, and C, and you have, as your mission to move all the way through the IPO Z. Where does Social Capital's public offerings fit in that sequence of letters? How early can they come, so that those who believe in what you're doing can be a part of that creation of wealth? How early do you think it could come? Will it be one of the letters?

Chamath Palihapitiya: It won't be one of the letters, but I think in the next 2-3 years, I'm going to find a way of taking it public. The reason why, I think it's very important that I don't dip into my own portfolio, so to speak, or create a conflict of interest that's not navigable.

We have a very simple rule, which is, anything above the low nominal, single-digit ownership percentage, we won't touch. Because I think it's very important that, before going to SPAC a company or if we're going to buy a company, it just comes at a price that isn't about dollar-cost averaging something that we already have, I just never want to have that reputational risk as an overhang. That's one thing.

But if I had to tell you what the goal is, the TopCo is Social Capital. Underneath, there are three pillars. Number 1 are a whole suite of private investments. Private investments can get broken down into the minority private investment that we do through the funds, and the majority private investment that we do off the balance sheet. We've bought four companies now that we own for an outright or anywhere between 60 and 100 percent of, but the overwhelming majority, where we can sweep the profits and reinvest them. Those are in very different categories. Two in healthcare, one insurance business, and one enterprise SaaS business. That's the first leg of the stool: minority and majority private investments.

The second leg of the stool are public investments. There's SPACs around technology. I have an ambition to launch a SPAC platform focused entirely and only on biotech. I also have an ambition to launch a series of ETFs, and I'll be looking to do that over the next year or two. That's the middle stool.

Then the third is what I call next-generation alternative returns. A big pillar of that is obviously crypto. But a second element of that is something that we just announced last week called Social Capital Emerging Managers, where it's a Millennium 0.72, ExodusPoint type business model, where we're going to put cohorts of individuals into business between one and five million to start. It can scale up to 50, hundreds of millions over time, and will allow them to trade anything. No risk limits, and we'll give them an auditable track record. The risk limit is, your marks scroll down is 30 percent. But we want people that will start in US equities, but over time, we've said, you can go as our field as baseball cards, shoes on StockX, wine on Rally Road. We're going to be very open-minded.

If you take these three pillars, so emerging returns, you can imagine what emerging returns does, it'll feed the other two pipelines, it'll feed people to start ETFs, it'll feed people that we may end up SPACing it, it may see people that may become great early stage investors for us. But they all worked together to generate what I think is the replacement to 60-40.

Lee Cooperman has this incredible, he has such a great way with words. He said, bonds used to be risk-free returns, now, they're return-free risks. He's right. If you take bonds off the table and you wipe out 40 percent of somebody's portfolio, we're 60 percent depending on how conservative they are.

I mean, you're talking about the wealth equality gap just exploding. Folks with normal amounts of money in their 401(k)s are going to get completely host. I just think that that's not right.

I'm going to experiment to figure out what the way things can be. I'll experiment with my own capital so that nobody ever thinks that this is about a fee game. This is why we're going to do ETFs before I launch more private venture funds. My private venture funds were basically running at three and 30. I had every incentive to keep making rich people richer, but I just don't want to do that anymore.

Social Capital will be the right weighting across all these different emerging things. You'll be able to buy and choose all of these things, I suspect. I'll spin up the venture funds into a BDC, I'll have ETFs, we'll have SPACs, great. But for some other people, they'll just want to hold TopCo and say, just manage my money the way you manage your money. Whatever returns you get is what I'll get. God bless you, go have at it. That's the goal of Social Capital.

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Social Capital Hedosophia Holdings Corp. VI Stock Quote
Social Capital Hedosophia Holdings Corp. VI
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