Today, Social Capital Hedosophia II, the blank-check business related to investor Chamath Palihapitiya, revealed that it will merge with Opendoor, taking the private realty start-up public at the same time. The deal comes throughout a wave of market interest in special function acquisition companies, or SPACs, frequently called blank-check companies. They exist as publicly traded entities in search of a personal company to integrate with, taking the private entity public without the trouble of an IPO.
In this case, the SPAC Social Capital Hedosophia II is combining with Opendoor, a richly-valued private innovation business that operates in the real-estate market.
“This is one of many turning points towards our mission and will assist us speed up the course towards developing the digital one-stop-shop to move,” Eric Wu, co-founder and CEO of Opendoor said to TechCrunch in a statement. “I am grateful for the ongoing assistance from my shareholders and teammates and many thankful for the 10s of thousands– and I hope quickly to be numerous thousands– of households, couples and people that rely on Opendoor with the biggest financial decision of their life.”
Palihapitiya, and his press team did not right away respond to ask for remark from TechCrunch over phone and e-mail.
Shares of Social Capital Hedosophia II, which trade under the ticker sign IPOB, were up around 14% in pre-market trading this morning.
According to a notification associated with the deal, Opendoor will have an enterprise value of $4.8 billion in the offer, consisting of equity value of around $6.2 billion and around $1.5 billion in money. Social Capital Hedosophia II will offer “approximately” $414 million in cash as part of the offer, while a personal investment in public equity deal, or PIPE, will provide another $600 million.
Some $200 million of the $600 million PIPELINE, or a third, will be funded by financiers in the SPAC, with Chamath Palihapitiya himself providing $100 million.
Palihapitiya is not subtle about his plans to utilize SPACs to pursue his aspirations to be the next Berkshire Hathaway. He famously brought Virgin Galactic to the general public markets through a SPAC, which played a role in the $1.7 billion revenue that Social Capital made in 2019.
If not getting a public through a SPAC, he’s also used individual capital to take majority stakes in companies. When explaining his hunger for acquisitions, he put it curtly to TechCrunch: “I like organizations that build non-obvious information links.”
The rest of the PIPELINE will be funded by another Palihapitiya group, some personal entities like Access Industries, and what a release hyped as “top-tier institutional investors” including Blackrock and a pension.
A total of $1 billion in money is expected to be supplied in the transaction. Especially all the money will flow to Opendoor itself, with investors in the business “rolling one hundred percent of their equity into the combined company,” per a notification. Together with the transaction, Adam Bain, previous Twitter COO and founder of 01 advisors, will join the board, CNBC reports.
Opendoor last raised $300 million at a $3.5 billion pre-money appraisal in March of 2019. Of that, $1.3 billion was in equity with almost $3 billion in financial obligation funding. Investors in the business consist of General Atlantic, the SoftBank Vision Fund, NEA, Norwest Endeavor Partners, GV, GGV Capital, Gain Access To Innovation Ventures, SV Angel, Fifth Wall Ventures, in addition to others.
Article curated by RJ Shara from Source. RJ Shara is a Bay Area Radio Host (Radio Jockey) who talks about the startup ecosystem – entrepreneurs, investments, policies and more on her show The Silicon Dreams. The show streams on Radio Zindagi 1170AM on Mondays from 3.30 PM to 4 PM.