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Chris Bryant

Why Chamath Palihapitiya Loves SPACs So Much

Investors shouldn’t rely on the optimistic financial projections published by blank check companies. This practice needs attention from the SEC.

Talking about the future.

Talking about the future.

Photo: Bloomberg

Former Facebook Inc. executive Chamath Palihapitiya is very open about why he’s such a fan of special purpose acquisition companies (SPACs), compared with taking a company public the usual way.

“In a traditional IPO you can’t show a [financial] forecast and you can’t talk about the future of how you want to do things, you’re just not allowed,” he said in a recent interview. He was referring to laws that exclude initial public offerings from so-called “safe harbor” protections covering forward-looking corporate statements. “Because the SPAC is a merger of companies, you’re all of a sudden allowed to talk about the future,” he told another YouTube questioner. “When you do that you have a better chance of being more fully valued.”