E97: SPAC updates, public/private market overview, Putin's end game & more

**David Friedberg** (0:00)
I'm in a very Daniel Plainview mood this week. There will be blood scene behind me.

**Jason Calacanis** (0:04)
I have a competition in me. I don't want to see other people succeed.

**David Friedberg** (0:07)
That's right. Best scene ever.

**Jason Calacanis** (0:09)
You are the furthest from that character. Like, that is not your spirit animal.

**Chamath Palihapitiya** (0:13)
Oh, there will be blood? That guy, Daniel Day-Lewis?

**Jason Calacanis** (0:15)
He has nothing to do with you.

**David Friedberg** (0:17)
I've watched it about a hundred times. Incredible.

**Chamath Palihapitiya** (0:19)
You must be so stormy and roiled on the inside. Oh my gosh.

**David Friedberg** (0:26)
Did you not see my roast at Sacks' birthday?

**Chamath Palihapitiya** (0:28)
It's just a roast. Did I not see it? I lived it. It was the most off-color, disgusting, egregious, mean diatribe I've ever heard. My Lord.

**David Friedberg** (0:38)
I have a competition in me.

**Jason Calacanis** (0:39)
I don't like to see others succeed. I can't stand that Jay Cal is a good moderate.
I guess everybody wants to know Chamath, you've wound down two SPACs. Thank you for doing this for IPOS specifically, because people are replying to me every day asking, what are you going to SPAC? But IPO, D and F, the money has been returned to investors.

**Chamath Palihapitiya** (1:20)
No, it's going to be returned.

**Jason Calacanis** (1:22)
Going to be returned to investors, thank you. And Bill Ackman, of course, he wound down his SPAC, returning 4 billion, there's over 500 SPACs out there, looking for deals. Tell us why this decision.

**Chamath Palihapitiya** (1:34)
Well, I've raised 10 SPACs, six in technology and four in biotechnology. And I've done six deals, two in tech and two in biotech.

**David Friedberg** (1:44)
Four in tech.

**Chamath Palihapitiya** (1:45)
Sorry, four in tech, four in tech, thank you, and two in biotech. So the reason to shut it down is pretty straightforward. It's like, you know, when we launched these things, the stock market was in a much different place than it is today. And so over the last two years at looking at deals, it's gotten harder and harder to find a good risk reward. Now why is that? Well, the thing with the SPAC is you do a deal today, but it doesn't usually close for six or seven months in the future. And so you have to do a deal where you have a really good sense that in six or seven months, when the deal comes to close, that the price will be the same or even higher than what it is today. And if it isn't, all of the investors that you've brought along in the SPAC have a right to redeem, which is to say they file a notice that says, you can complete the deal, but I want my money back. And what they get back is the initial $10 that they used to buy the stock in the first place, because when we sold, when we started the SPAC, we sold stock at $10.
And so from my perspective, I was looking at this and I'm like, you know, this is a super volatile, ugly point in the market. This last year has been really problematic. And I kind of said this last November and Nick, we can play the clip after and we can come back to it. But basically, my decision was that at this point to do a deal, would probably put a lot of capital at risk. And in all of these deals, I'm typically investing $100 million at least in each of them. And so I couldn't justify that. I couldn't see a good risk reward. And I thought the right thing to do, the responsible thing to do was just to wind these things down. I'll lose, I don't know, 10, 15, 20 million bucks for having set these things up. But we give everybody their money back, that $10. And I think that's actually better over the next five or six months than what it'll otherwise do if you're invested in the market. Now that's a belief that I have. But hopefully when people get the $10 back in the next few weeks, if they want, they can go and put that money back in the market. And hopefully they'll do well. But from my perspective, the risk reward was not good.

**Jason Calacanis** (3:53)
Is part of the issue the inventory that's available of great companies as well. That's one of the things I heard speculated on CNBC. It's hard to convince a private company to go public.

**Chamath Palihapitiya** (4:02)
Here's my experience. You know, when I was talking to all of these CEOs of these Silicon Valley companies, initially, there was a lot of misunderstanding about what SPACs were. And I think we were able to dispel that because we had some really successful transactions. Then there was a lot of interest in being a part of it. In this phase, we were suffering from two very important things. One was that valuations were just completely up in the air. People had a huge question mark on late stage valuations because we would come in, we would do the work, and we would say the company is worth X. And that number typically was 50 or 60 percent lower than their last private valuation. And so when it came time for us to negotiate, you know, doing the deal, even if the founder was roughly on board, the rest of the board was not because a lot of them would have seen some pretty meaningful markdowns in their private assets. And when the company had enough money to kind of like, you know, at least stay private for another year or so without having to raise money, on balance, those investors felt it was more prudent for them to not take the mark and to not take the deal at such a lower discount. So that was a big issue that we ran into, because every time we would price a deal, again, we're trying to create a margin of safety for us and our investors.