Palihapitiya in US$ 4.8bn SPAC deal to take SoftBank-backed Opendoor public

REUTERS: SoftBank-backed home-selling platform Opendoor is going public through a merger with a blank-check company led by venture investor Chamath Palihapitiya in a deal that will value the combined entity at US$ 4.8 billion, the companies said yesterday.

Opendoor buys properties from sellers and makes repairs, at a service charge, and then lists them for sale. As part of the deal with Social Capital Hedosophia Holdings Corp II, Opendoor will get US$ 1 billion cash, including US$ 600 million from investors such as BlackRock and Healthcare of Ontario Pension Plan and Palihapitiya.
Social Capital shares jumped 21 percent in pre-market trade.

A blank-check company, also known as a special purpose acquisition company (SPAC), uses capital raised through an initial public offering to buy a private company, usually within two years. The deal then takes the private company public.

Once confined to the backwaters of capital markers, SPACs emerged this year as a major driver of IPOs, led in part recently by deals for space tourism company Virgin Galactic Holdings Inc and fantasy sports and gambling company DraftKings Inc.

Social Capital, the blank-check firm backed by Virgin Galactic Chairman Chamath Palihapitiya, raised US$ 360 million when it went public in April.

SPAC acquisitions in 2020 have jumped to a record US$ 27.4 billion, including debt, with a further US$ 35.2 billion of deals announced and pending completion, according to SPAC Research. SPAC deals last year hit US$ 24.8 billion.

Several private companies, including electric carmaker Fisker, healthcare services provider MultiPlan and sales and marketing services provider Advantage Solutions Inc, have gone public through a SPAC deal this year.

Other high-profile investors like Bill Ackman and Michael Klein have also raised billions through their SPACs this year. Ackman’s SPAC Pershing Square Tontine Holdings Ltd raised US$ 4 billion in its IPO in July, making it the largest SPAC IPO.

In 2018, SoftBank’s Vision Fund invested US$ 400 million in Opendoor, which was founded in 2014.