Social Capital Hedosophia’s SPACs offer privately held companies another avenue to the public market. Before you hop on the bandwagon, bear in mind that this fresh-faced company has yet to establish a solid track record for itself.
What is Social Capital Hedosophia?
Social Capital Hedosophia is a grouping of six special purpose acquisition companies (SPACs) founded in 2019 and headquartered in Palo Alto, California. The blank check company group was founded by tech executive and venture capitalist Chamath Palihapitiya and created with the intention of acquiring privately held companies to bring them to the public market. While still relatively young, Social Capital Hedosophia made its fair share of headlines when it acquired Virgin Galactic — the British commercial spaceflight company — in 2019. Following the success of its first merger, Palihapitiya said there was plenty more in the works for Social Capital Hedosophia.
Social Capital Hedosophia vs. Social Capital
Both Social Capital and Social Capital Hedosophia were founded by Chamath Palihapitiya. And although they share similar names, they’re separate entities with unique investment objectives. Social Capital is Palihapitiya’s private venture capital firm, founded in 2011 and headquartered in San Francisco. The firm backs companies from a variety of industries, including Bustle, Imperium, Slack, SurveyMonkey and Wealthfront. Unlike Social Capital Hedosophia, Social Capital doesn’t acquire the companies it invests in. Instead, the venture capital firm focuses on funding startups in emerging markets with high growth potential. To date, it has made 381 investments and 49 exits. However, Social Capital has also created six SPACs.
How can I invest in Social Capital Hedosophia?
You’ll need a brokerage account to invest in Social Capital Hedosophia in one of two ways:
Invest in the SPAC itself. Look up one of the SPAC’s ticker symbols and add that stock to your portfolio.
Buy stock in a company the SPAC merges with. Invest in one of the SPAC’s acquired companies, like Virgin Galactic, which now has a dedicated ticker symbol.
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Social Capital Hedosophia’s IPOs
Despite its short operating history, Social Capital Hedosophia has been busy — and has big plans for upcoming acquisitions.
Past IPOs
As of February 2021, Social Capital Hedosophia has a handful of companies under its belt including Virgin Galactic (SPCE); Opendoor (OPEN), a real estate portal; and Clover Health (CLOV), a Medicare Advantage plan. Virgin Galactic and Opendoor trade on the New York Stock Exchange (NYSE), while Clover Health trades on the Nasdaq. Investors should note that Clover Health is facing a legal battle. Short-selling specialist Hindenburg Research on February 5 claimed Clover Health “lured retail investors into a broken business facing an active, undisclosed” Department of Justice investigation. Clover Health claimed it is cooperating with the SEC in an investigation launched by the report.
Upcoming IPOs
In 2021, SoFi announced its intention to go public by merging with Social Capital Hedosophia Holdings V. The merger would value the millennial-focused financial services firm at $8.65 billion — but no set date has been announced. Also known as Social Finance, the company emerged in 2011 as a student loan refinancer. It now offers various financial products including credit cards, mortgages and brokerage accounts that offer access to cryptocurrency.
Social Capital Hedosophia stocks
Palihapitiya revealed in an episode of his All-In Podcast he reserved ticker symbols IPOA through IPOZ on the New York Stock Exchange. Its first SPAC, Social Capital Hedosophia I (IPOA) merged with Virgin Galactic. Iterations II (IPOB) and III (IPOC) merged with Opendoor and Clover Health. Iteration V (IPOE) plans to merge with SoFi. And as for the rest of its ticker symbols? It’s anyone’s guess. In the same podcast episode, Palihapitiya said he has $100 million tied up in each deal to demonstrate his commitment to potential investors. As of April 2021, Social Capital IV (IPOD), Social Capital V (IPOE) and Social Capital 6 (IPOF) are available for public investors to purchase on the major exchanges.
Company summary
Virgin Galactic Holdings, Inc., an aerospace and space travel company, focuses on the development, manufacture, and operation of spaceships and related technologies. The company engages in the design and development, manufacturing, ground and flight testing, spaceflight operation, and post-flight maintenance of spaceflight systems for private individuals, researchers, and government agencies. Virgin Galactic Holdings, Inc. is headquartered in Tustin, California.
Opendoor Technologies Inc. operates a digital platform for residential real estate transactions in the United States. It buys and sells homes. The company's product offerings comprise sell to opendoor product that enables homeowners to sell their home directly to it and resell the home to a home buyer; list with opendoor product that allows customers to list their home on the MLS with opendoor and receive cash offer; and opendoor marketplace product that connects the home seller with an institutional or retail buyer. It also provides real estate brokerage, title insurance and settlement, and escrow services, as well as property and casualty insurance, real estate licenses, and construction services. Opendoor Technologies Inc. was incorporated in 2013 and is based in Tempe, Arizona.
Clover Health Investments, Corp. provides medicare advantage plans in the United States. It operates through two segments: Insurance and Non-Insurance. It also offers Clover Assistant, a cloud-based software platform, that enables physicians to detect, identify, and manage chronic diseases earlier; and access to data-driven and personalized insights for the patients they treat. Clover Health Investments, Corp. is based in Franklin, Tennessee.
Hedosophia isn’t Chamath Palihapitiya’s only investment venture. He also founded a venture capital firm called Social Capital. In conjunction with financial firm Suvretta Capital Management, Social Capital filed paperwork to launch four new SPACs with a special focus on biotech. The SPACs have been dubbed:
Palihapitiya aims to raise $200 million through each SPAC and all four will launch on the Nasdaq. The SPACs will attempt to make acquisitions in the neurology, oncology and immunology subsectors. Shares will be available for $10 apiece. Palihapitiya announced that retail investors will have the opportunity to invest in these SPACs through SoFi, which recently launched its IPO investing feature. But SoFi traders will be expected to hold the shares for at least 120 days or pay a penalty: $50 for the first sale and $5 per subsequent sale until the four-month holding period has elapsed.
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Companies like Social Capital Hedosophia offer privately held companies as an alternative to the traditional IPO. It has ambitious plans for the future and the ticker symbols to show for it — but much remains uncertain about the future of this special purpose acquisition company. To invest in a SPAC or a company it acquires, you’ll need a brokerage account. Compare your options across multiple platforms to find a broker that can cater to your budget and investment needs.
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Shannon Terrell is a lead writer and spokesperson at NerdWallet and a former editor at Finder, specializing in personal finance. Her writing and analysis on investing and banking has been featured in Bloomberg, Global News, Yahoo Finance, GoBankingRates and Black Enterprise. She holds a bachelor’s degree in communications and English literature from the University of Toronto Mississauga. See full bio
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