Indian American venture capitalist Chamath Palihapitiya, founder of VC firm Social Capital and former original executive of Facebook, has launched, in partnership with London-based venture capital firm Hedosophia, the investment company Social Capital Hedosophia Holdings Corp.
The new “blank check company,” for which Palihapitiya will serve as the CEO, has filed paperwork for a $500 million initial public offering despite it not making any products, having zero customers and owning nothing.
Despite that, the company intends to raise money first and use that money to buy stakes in private tech companies, according to a Business Insider report.
SCHH will look into buying minority stakes, controlling interests or even full ownership of the tech companies it shows interest in, the report said.
The idea is to give these tech companies the benefits of being a publicly traded company with fewer drawbacks, SCHH said in its Aug. 23 filing with the Securities and Exchange Commission.
Additionally, it allows public investors access to the wealth being created by well-performing private tech companies, it said.
Palihapitiya has long criticized the traditional venture model and expressed his admiration for Warren Buffett, who has spent more than 50 years building Berkshire Hathaway into a giant publicly-traded holding company, filled with food businesses, insurers and industrial brands, CNBC reported.
As of May 2017, Social Capital Hedosophia estimates there are about 150 tech startups valued at over $1 billion, compared to about 200 public technology companies with a market cap of $1 billion, Business Insider said.
In years past, those 150 companies would have become public companies. Today, they can hold out as private companies indefinitely because there's so much money available to fund their growth from private investors, it said.
Palihapitiya's endeavor is all about uniting "technologists, entrepreneurs, and technology-oriented investors," the filing said.
Social Capital partner Tony Bates, also a former CEO of Skype, will be on the holding company's board. Adam Bain, former chief operating officer of Twitter, is also serving on the SCHH board.
A University of Waterloo graduate, Palihapitiya has held executive roles at AOL, Facebook, Integrated Plasmonics Corp. and Athos, as well as board director posts at Playdom, Lemon, Agnitus, Syapse Inc. and remind101. In addition to founding Social Capital and Athos, Palihapitiya also serves as an owner/board member of the NBA’s Golden State Warriors.
Additionally, as an investor, the Indian American entrepreneur has backed companies that include Box, Palantir, Pure Storage, Slack and Yammer.
Palihapitiya's team is planning to meet with investors early this month and launch the offering by mid-month on the New York Stock Exchange, according to a Wall Street Journal report citing people familiar with the matter.