Chamath Palihapitiya, founder and CEO of Social Capital speaks during the inaugural Sohn Investment Conference in New York City, The United States on 24 April 2018, March 23. REUTERS Brendan McDermid
Chamath Palihapitiya's $16 million investment in the special purpose acquisition company that took Clover Health Investments Corp public, was worth $682 million on Tuesday after a Reddit rally in the health insurer's share.
Clover shares ended this week with 86% as it became the latest'meme stock' to capture the imagination of amateur investors on Reddit and other social media platforms.
The shares were severely underperformed in the wider market and traded below SPAC's IPO price since February when the Short Selling Firm Clover accuses investors of hiding a U.S. Department of Justice inquiry into its business from investors.
Clover said that the inquiry was not financially material and was routine to disclose. The Securities and Exchange Commission launched an investigation into Hindenburg's claims in the United States.
According to Reuters calculations, Palihapitiya, one of the most prolific SPAC sponsors, now has a paper profit of more than 4,000% after Clover shares close on Tuesday; this boosts the company's market value of $9 billion and increases the value of his 21.3% stake in the company.
A Palihapitiya spokesperson did not respond to a request for comment.
A third of Palihapitiya's stake in Clover has been pledged for a loan by Credit Suisse as collateral, a regulatory filing shows. Earlier this month, a six-month lock-up that would stop him from buying out his stake expired earlier this month.
Palihapitiya's windfall is not just from the Reddit rally. SPAC managers are awarded warrants and founder shares that result in them owning a much bigger share of the combined company that their invest would otherwise entitle them to.
Clover Health transferred Palihapitiya public through a $3.7 billion merger which was closed in January. He merged several so-called blank check firms that have launched with a wide range of companies, including the fintech venture Opendoor Technologies Inc and home-selling platform Virgin Galactic Holdings Inc.
Earlier in May, Palihapitiya launched four new, warrant-less SPACs that are looking to raise a total of $800 million through IPOs, with a focus on buying biotech companies.