With Social Capital Hedosophia, Chamath Palihapitiya set himself the lofty goal of building this generation’s Berkshire Hathaway. The eccentric, sometimes outspoken, Palihapitiya is held as one of the names to follow in investing circles. This, coupled with the success of Virgin Galactic’s reverse merger last year, meant when the company announced it would be creating two new SPACs, Social Capital Hedosophia Hldgs II (NYSE: IPOB) and Social Capital Hedosophia Hldgs III (NYSE: IPOC) to take a U.S. (B) and international (C) tech company public, investors ears pricked up. It seems that it has found its match in Opendoor, an exciting real estate startup based in San Francisco, with the company in advanced talks to list through a reverse merger with Social Capital II.
It’s all very cloak and dagger at the minute, with neither company replying for comment, but the merged company would be valued at around $5 billion according to a source close to the talks. It is said that Social Capital II will look to raise new capital to fund the deal. Investors have approved of the potential partnership, with Social Capital II’s stock soaring in after-hours trading last night, jumping as high as 21% before pulling back slightly. The deal could handsomely reward those early investors who have backed Palihapitiya’s vision from the start, and it is also giving Social Capital III or IPOC a boost. The SPAC aimed at an international tech company is up 4% in pre-market trading today.
Opendoor is looking to revolutionize the house-flipping game, buying houses digitally, investing in small improvements to increase their value, and then selling them on. Its last funding round back in March of last year valued the company at $3.8 billion, and it has some big names behind it, including the company that can’t seem to avoid the news these days, Softbank. By reverse-merging with a SPAC, Opendoor will be able to list without the big public roadshow and expensive fees commandeered by the big Wall Street banks. It’s also a much faster way of going public, and by partnering with a company like Social Capital Hedosophia, who has a proven track record here, it’s sure to be a success if the deal comes to fruition.
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Financial Analyst at MyWallSt
Michael's first and favorite stock is Square, which he sees becoming a massive player in the payments industry and a leader in the war on cash.