Summary List Placement
Chamath Palihapitiya went on CNBC’s “Squawk Box” on Tuesday to discuss his move to take real-estate startup Opendoor public through a reverse merger with his blank-check company.
Now, a different founder is asking: “Can he do that?”
Okta CEO Todd McKinnon, whose identity-management startup went public in 2017, said he would have been in “serious trouble” with the Securities and Exchange Commission if he had hyped the stock just a day after his company’s IPO.
Social Capital did not respond to a request for comment on Tuesday.
Typically, when a company goes public, it agrees not to share any information about its activities that isn’t already in its publicly available filings with the SEC. This is known as a quiet period, meant to avoid inflating the stock price.
But Opendoor is bypassing the traditional path to the public markets in selling to a special purpose acquisition company (SPAC). Opendoor is essentially hitching its name to the already public shell company which has no business operations of its own. The process lets startups skip a lot of the paperwork drudgery, as well as the public scrutiny, that usually comes with an IPO.
Palihapitiya was acting within the guidelines set out by the SEC, markets insiders say.
Palihapitiya spoke at length about the Opendoor deal during his “Squawk Box” interview. His investment company’s SPAC has agreed to buy a large but as yet undisclosed stake in OpenDoor, and when the merger is complete, public market investors will essentially be able to own a piece of OpenDoor by buying the SPAC’s public stock, effectively turning OpenDoor into a public company. Opendoor will receive nearly $1 billion in new capital from the deal to fuel its growth, it said.
“These guys are my next 10x idea,” Palihapitiya said on CNBC. The investor later tweeted a link to a presentation showcasing Opendoor’s growth and track record of success. Shares of Palihapitiya’s SPAC surged as much as 35%, to $17.56, on Tuesday.
How does this work? If I would have gone on @SquawkCNBC the day after @okta IPO and talked like this, I would have been in SERIOUS trouble with the SEC…. Quiet period, lock up, pumping the stock? Does that all go away with a #SPAC https://t.co/E9TZYDNFHm
— Todd McKinnon (@toddmckinnon) September 15, 2020
“How does this work?” McKinnon said in a tweet. “If I would have gone on @SquawkCNBC the day after @okta IPO and talked like this, I would have been in SERIOUS trouble with the SEC…. Quiet period, lock up, pumping the stock? Does that all go away with a #SPAC ?”
The answer is somewhat ambiguous.
SPACs are in a different position than private companies going public
“There isn’t the type of quiet period as you would have with an IPO,” said Mark Stone, senior managing director at Gores Group, who manages the investment firm’s blank-check activity.
Just a few weeks ago, the CEO of Gores Group
Source:: Businessinsider – Finance