Chamath Palihapitiya is an investing genius, even though some of his opinions and investments in the technology space have invited a lot of controversy on Wall Street. Palihapitiya, the chief of Social Capital, a venture capital firm, has made solid calls on prominent startups over the years that later went on to become a part of big companies like Amazon.com, Inc. (NASDAQ:AMZN), Box, Inc. (NYSE:BOX), and Apple Inc. (NASDAQ:AAPL). The venture capital firm led by Palihapitiya was converted into a family office in 2018.
Palihapitiya was one of the first venture capitalists who understood the direction in which big tech was heading, even as far back as 2016. At the Sohu Investment Conference, he famously predicted that Amazon.com, Inc. (NASDAQ:AMZN) would reach $3 trillion in valuation within the next ten years. In late 2018, the ecommerce giant crossed $1 trillion in valuation for the first time after a stellar earnings report. It has continued to climb since then. As of the end of 2023, Amazon.com, Inc. (NASDAQ:AMZN) has a market capitalization of $1.5 trillion.
At the Sohu conference, Palihapitiya talked in great detail about his bullish sentiment towards Amazon.com, Inc. (NASDAQ:AMZN), calling it a "multi-trillion-dollar monopoly hiding in plain sight". The investor broke down his thesis into three parts, namely retail, web services, and other offerings. He estimated that, within the next decade, the retail business of the firm would reach $1 trillion in value, with web services crossing it to register $1.5 trillion, and other offerings contributing $500 billion to the overall market cap.
"My prospective is that it is a story that’s just beginning. In fact, we believe and our models indicate that this is a $3.0 trillion company in the next 10 years. “[Jeff Bezos] is building the most durable company in the world […] It’s something we can all own, it’s something that has a fundamental ability to participate in every single faucet of Internet value-creation."
In 2018, Palihapitiya outlined his bullish thesis on Box, Inc. (NYSE:BOX), a firm that provides a cloud content management platform that enables organizations of various sizes to manage and share their content from anywhere on any device. Palihapitiya was way ahead of the curve when it came to artificial intelligence, a tech sector that has gained prominence in the past few months on the stock market. The investor had boldly predicted that within the next decade, most corporations would overhaul their software to include AI, a trend sweeping the corporate world in 2023. Palihapitiya had termed Box, Inc. (NYSE:BOX) his favorite idea to play the AI space, noting that the firm sat on top of an enormous amount of research and development that would serve it well in the long term.
"Box sits on top of an enormous amount of R&D. It gives companies the ability to add intelligence to audio and video ... [Box] is a business that is incredibly cheap and undervalued with incredibly low churn and unbelievable margin of safety. Over the next 10 to 20 years most enterprise software will need to get remade to incorporate artificial intelligence. Box is in a great position to win in this third wave of computing."
Chamath 'SPAC King' Palihapitiya
Palihapitiya is known as a SPAC King. SPACs, or special purpose acquisition companies, were all the rage back in the pandemic as growth firms hungry for capital raised hundreds of millions and went public in blockbuster deals, many of which later turned out to be a bust. In the post-pandemic economy, with rising interest rates and record inflation numbers, SPAC-linked IPOs decreased dramatically, even forcing Palihapitiya to dissolve two of his own SPACs that were rumored to be pursuing deals in the biotech sector.
This disappointment also made Palihapitiya look for new investors for his venture capital firm, although finding them was hard in a recessionary economy where risk takers had largely hedged themselves against a market crash. In late 2022, Financial Times reported that Palihapitiya had returned more than $1.5 billion to investors after dissolving his SPACs that had failed to find targets. In a regulatory filing, the investor admitted that he had talked to hundreds of firms for deals but eventually walked away.
The incredible rise and fall of SPACs can be understood in context of SPAC-linked IPOs and their proceeds from 2020 to 2023. In 2023, per data maintained by SPAC Insider, there were 31 IPOs that raised nearly $3,840 million. In 2022, these numbers were 86 and $13,430 million. In 2021, they were 613 and $162,502 million. In 2020, there were 248 IPOs that raised $83,895 million. The spike in SAPC-linked IPOs during the pandemic appears to have largely fizzled out considering the performance of the companies that went public in this manner.
IPO Pumps Still Offer Promise
Recent media reports indicate that Palihapitiya borrowed money from investment bank Credit Suisse to finance two of his biggest recent deals — Virgin Galactic Holdings, Inc. (NYSE:SPCE) and Opendoor Technologies Inc. (NASDAQ:OPEN). Virgin Galactic Holdings, Inc. (NYSE:SPCE) and Opendoor Technologies Inc. (NASDAQ:OPEN) had raised big valuations on their IPO, the former hitting $2.3 billion and the latter $17 billion on stock market debuts. Since then, the market capitalizations of the two have fallen to $1 billion and $3 billion.
Carrie Wheeler, the CEO of Opendoor Technologies Inc. (NASDAQ:OPEN), highlighted during the third quarter earnings call that the company still had the chance to build a generational business and disrupt a massive market. Wheeler noted that the firm remained a market leading platform that was leveraging technology to transform and simplify the way people buy and sell their home. Some of the steps the firm was taking to improve revenue included scaling customer acquisition channels and improving pricing systems and cost structure.
“Throughout 2023, we made cost structure and pricing accuracy improvements and passed those through despite reductions, which in turn enabled us to increase acquisitions quarter-over-quarter. These spreads improvements, combined with our growing partnership channels and plans to increase advertising spend in the first half of 2024, should allow us to accelerate home acquisitions next year. Our third quarter results demonstrate continued execution in what remains an uncertain US housing market. Mortgage rates hit a 22-year high of 8% in October, up over 100 basis points since reported Q2 results in August. Market clearance rates, while still at historically healthy levels, have declined more than expected with higher rates further depressing buyer demand.
Despite recent misses, Palihapitiya, who has previously held leading roles at big companies like Facebook, The Mayfield Fund, AOL, and Winamp, remains a much-revered figure in the finance world. On social networking platform X, he enjoys an ardent fan following that follows his every move. Close to 1.6 million people follow him on X and his tweets often lead to massive spikes or drops in prices of stocks, especially those operating in the tech and biotech domain, a sector in which he is considered an expert.
Our Methodology
These were picked from a careful assessment of the investing history of Chamath Palihapitiya. Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2023 was used to identify the number of hedge funds that hold stakes in each firm. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Chamath Palihapitiya Stocks: 12 Stocks Pumped in the Last 10 Years
Chamath Palihapitiya Stocks: Stocks Pumped in the Last 10 Years
12. Social Capital Hedosophia Holdings Corp
Number of Hedge Fund Holders: N/A
Social Capital Hedosophia Holdings Corp are a series of SPACs led by Chamath Palihapitiya. In late 2022, after months of pumping the stocks and rumors about blockbuster biotech merger deals, Social Capital Hedosophia Holdings Corp IV and Social Capital Hedosophia Holdings Corp VI were dissolved without finding a suitable merger deal.
11. SurveyMonkey
Number of Hedge Fund Holders: N/A
SurveyMonkey is an experience management company that offers cloud-based software. Chamath Palihapitiya was an early investor in the firm. SurveyMonkey went public in 2018 at a valuation of more than $1.3 billion. In March this year, the parent company of the firm went private.
10. Sunlight Financial Holdings
Number of Hedge Fund Holders: N/A
Sunlight Financial Holdings operates a business-to-business financing platform in the United States. In late October, the firm filed for bankruptcy. Back in 2021, Chamath Palihapitiya had tweeted that he would be investing in the company that was valued at over $1 billion at the time.
Latch, Inc. (NASDAQ:LTCH)operates as an enterprise technology company in the United States and Canada. In early 2021, Chamath Palihapitiya announced that his SPAC would be merging with the firm and taking the latter public in a deal worth over $1.5 billion.
At the end of the third quarter of 2023, 2 hedge funds in the database of Insider Monkey held stakes worth $1.2 million in Latch, Inc. (NASDAQ:LTCH), compared to 21 in the preceding quarter worth $33 million.
Unlike Amazon.com, Inc. (NASDAQ:AMZN), Box, Inc. (NYSE:BOX), and Apple Inc. (NASDAQ:AAPL), Latch, Inc. (NASDAQ:LTCH) is one of the investments of Chamath Palihapitiya that did not witness sustained success.
Akili, Inc. (NASDAQ:AKLI) develops digital therapeutics for cognitive impairments. In early 2022, the firm signed a merger deal with a SPAC led by Chamath Palihapitiya in a deal worth more than $1 billion.
At the end of the third quarter of 2023, 4 hedge funds in the database of Insider Monkey held stakes worth $2.5 million in Akili, Inc. (NASDAQ:AKLI), compared to 5 in the previous quarter worth $5.7 million.
ProKidney Corp. (NASDAQ:PROK) is a clinical-stage biotechnology that engages in developing cellular therapy candidates. In early 2022, Chamath Palihapitiya helped take the firm public in a deal worth more than $2.6 billion.
At the end of the third quarter of 2023, 6 hedge funds in the database of Insider Monkey held stakes worth $19 million in ProKidney Corp. (NASDAQ:PROK), compared to 2 in the preceding quarter worth $35 million.
Virgin Galactic Holdings, Inc. (NYSE:SPCE) focuses on the development, manufacture, and operation of spaceships and related technologies. In late 2019, Chamath Palihapitiya took Virgin public in a deal valuing the firm at around $2.3 billion.
At the end of the third quarter of 2023, 8 hedge funds in the database of Insider Monkey held stakes worth $6.3 million in Virgin Galactic Holdings, Inc. (NYSE:SPCE), compared to 14 in the preceding quarter worth $11 million.
In contrast to Amazon.com, Inc. (NASDAQ:AMZN), Box, Inc. (NYSE:BOX), and Apple Inc. (NASDAQ:AAPL), Virgin Galactic Holdings, Inc. (NYSE:SPCE) is one of the investments of Chamath Palihapitiya that did not witness sustained success.
