Sep 14, 2017

Social Capital says its 'IPO 2.0' is a better process for unicorns

Illustration: Lazaro Gamio / Axios

Venture capital firm Social Capital wants to make going public cool again, this morning raising $600 million in an IPO for a blank check acquisition company that is designed to eventually acquire a tech "unicorn."

Unicorn? That's the Silicon Valley term for a privately-held startup valued at $1 billion or more.

Why it matters: There is a glut of highly-valued and well-capitalized startups that have avoided going public, often to avoid both the hassle of an IPO and the scrutiny that comes with being listed. The trend has frustrated a lot of startup employees and investors, who want to convert their equity into into cash. Social Capital hopes its approach can help alleviate the pressure.

The argument: Chamath Palihapitiya is founder of Social Capital and CEO of the blank check vehicle, named Social Capital Hedosophia Holdings. He believes that "this whole [IPO] process sucks," and that a unicorn would be attracted by the opportunity to go through a much less distracting 60-90 day merger process. Moreover, it offers faster liquidity to employees and other early shareholder, since lock-up periods can be waived.

More Q&A with Palihapitiya, who spoke with Axios after units began trading on the NYSE:

Axios: What about pricing?

Palihapitiya: "You have zero ability to do real price discovery [in the traditional IPO process]. You go and talk to banks and they create a book of interest—what the pricing is what are they willing to pay. That's why you see this really violent price behavior [post-IPO]."

"We have curated 25 of the most prestigious public market investors (mutual funds, hedge funds, etc.). That price is extremely legitimate and will be dramatically fairer."

Are unicorns interested?

"When the S-1 got filed, at least 15 of the most prestigious unicorn and bigger public company CEOs called me."

What type of company are you looking for?

"A company that's between $3 billion and $15 billion in value, probably for the first one, is in the U.S. or Europe, and we want to find something that's pretty iconic and well- known."

You say you might pick a company in the Social Capital portfolio — is that a conflict of interests?

"Our job is to win," he said. "My job is to put the ball in the basket, and then do it again, and again, and again." (Reminder that Palihapitiya is part owner of the Golden State Warriors!)

Go deeper

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 4 p.m. ET: 1,407,123— Total deaths: 81,103 — Total recoveries: 297,934Map.
  2. U.S.: Total confirmed cases as of 4 p.m. ET: 386,800 — Total deaths: 12,285 — Total recoveries: 20,191Map.
  3. Federal government latest: Trump removes watchdog overseeing rollout of $2 trillion coronavirus bill — Senate looks to increase coronavirus relief for small businesses this week
  4. Public health latest: Testing capacity is still lagging far behind demand.
  5. World latest: China reopens Wuhan after 10-week coronavirus lockdown.
  6. Wisconsin primary in photos: Thousands gathered to cast ballots in-person during the height of the coronavirus crisis in the U.S.
  7. What should I do? Pets, moving and personal health. Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.

America's food heroes

Photos: Charlie Riedel/AP (L); Brent Stirton/Getty Images

The people who grow, process and keep food stocked on shelves are doing heroic work in these conditions, often for bottom-barrel pay.

Why it matters: Millions of Americans don't have the luxury of working from home, and it's essential that food workers keep working so we can keep eating.

Go deeperArrow16 mins ago - Health

Acting Navy secretary resigns over handling of virus-infected ship

Photo: Chip Somodevilla/Getty Images

Acting Navy Secretary Thomas Modly resigned Tuesday after apologizing for comments he made about Capt. Brett Crozier, who was removed after a letter he wrote pleading with the Navy to address the coronavirus outbreak aboard the USS Theodore Roosevelt was leaked to the press. The resignation was first reported by Politico.

Why it matters: The controversy over Crozier's removal was exacerbated after audio leaked of Modly's address to the crew, in which he said Crozier was either "too naive or too stupid to be a commanding officer of a ship like this." After initially backing Modly's decision, President Trump said at a briefing Monday that he would "get involved."