Some view Chamath Palihapitiya as the king of SPACs (special purpose acquisition companies). He's helped create several SPACs, including Social Capital Hedosophia Holdings Corp. VI (IPOF). 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 thoughts about Social Capital's SPACs as an investing alternative.
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Tom Gardner: How do you advise people use the SPACs that you're rolling out? Would you suggest that they wait for the SPAC ETF if they're an individual investor that wants to ride along? I mean, are you looking at this as a collection of 26? They're all equally important to you. Or you're expecting that like the rest of the market, there's going to be about 10-15 percent of them to drive 90 percent of the returns?
Chamath Palihapitiya: I think that broadly speaking, a small subset will drive all the returns. I think that I have a unique position of having been the first mover. I think we write an enormous amount of capital. I think that we are operators with some pretty good insights in how to build companies.
Because of the first three deals that we've done, we right now are in a power alley where we can really consolidate, share, and ownership of this platform in Silicon Valley. I feel pretty confident that we will be one of the few winners. I think that we will be indexed to the right-hand part of that distribution of returns. Within then, my goal is to basically put an equivalent amount of money in each one.
I think that over time, what that will mean is a really good diversified portfolio across nine major categories. I do think that there could be more than 26 SPACs. I mean, the alphabet runs 26 letters, but could there be 50 of these over the next 10 years? There could be. E-commerce, deep tech, healthcare, climate change, education, enterprise SaaS, consumer subscription services, machine learning and AI, and biotech, and those nine areas, I think, will represent the overwhelming majority of returns.
They are technology first businesses. They are going to grab and build share. Our goal is to find in those categories the fastest growing that are beyond product market fit, the earliest phases of experimentation entering product market fit and ready to go nuclear over the next 20 years that we can hold safely, ideally 30 years, ideally 40 years. I think that that portfolio does well. So I'm thinking about it as an even allocation, the same dollar I put into A, I put into B, C, D, E and F.