Chamath Palihapitiya has found his next SPAC destination – Clover Health, an Alphabet-backed Medicare insurance start-up.
Clover will be merged with Social Capital Hedosophia Holdings Corp. III, a special-purpose acquisition company. The deal values Clover at $ 3.7 billion and includes up to $ 1.2 billion in cash receipts, of which $ 400 million will be provided through a Palihapitiya-led private investment in the public facility.
"What we have is a company that actually delivers on the promise of technology improvement, better outcomes and cheaper healthcare," Palihapitiya said Tuesday in CNBC's Squawk Box. It is "a market that I consider huge and growing rapidly" and a business "that is consistently involved year after year".
"This is one of the easiest investments I have ever made," said Palihapitiya. He added that the company will be overall profitable by 2023.
The move came just three weeks after Palihapitiya announced its $ 4.8 billion SPAC deal with real estate startup Opendoor. The billionaire had success with his first blank check transaction, which space tourism company Virgin Galactic floated last year and was particularly active in the SPAC world in 2020. Palihapitiya previously announced that it has reserved tickers ranging from "IPOA" to "IPOZ" on the New York Stock Exchange.
Founded in 2013, Clover sells Medicare Advantage in the United States. Clover currently has more than 57,000 members in seven states. The deal will provide "significant capital" for the company to "scale and improve health outcomes for seniors in the United States," the company said in a statement Tuesday.
A SPAC is established to raise funds to finance a merger or acquisition, typically within two years. The target company will be listed on the stock exchange through the acquisition.
As an alternative to traditional IPOs, SPACs have seen explosive growth this year due to the unprecedented volatility caused by the coronavirus pandemic. Total revenue from SPACs this year has exceeded $ 40 billion, according to Refinitiv, nearly tripling last year's level.
Many investors and companies are turning to the SPAC route because of its time efficiency and execution security. Companies can also skip the roadshow process and avoid the scrutiny that comes with a traditional IPO. The involvement of high profile investors such as hedge fund billionaire Bill Ackman and Oakland A CEO Billy Beane added more hype to this vehicle.
Palihapitiya said last month that the SPAC boom is healthy for the overall market, which is shrinking by the number of stocks and is heavily focused on names of megacap technologies.
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