Palihapitiya's SPAC to Make Virgin Galactic Public

IPOA was set up as a way to bring private companies to the market without an IPO

by Josh Selway

Published on Jul 9, 2019 at 9:20 AM

Social Capital Hedosophia Holdings Corp (NYSE:IPOA), a so-called special purchase acquisition company (SPAC) co-founded by tech investor Chamath Palihapitiya, announced that it's merging with Richard Branson's space tourism company Virgin Galactic to bring the latter to public markets. Indeed, the SPAC was originally created to help private companies bypass an initial public offering (IPO).

IPOA stock began trading publicly in the U.S. back in July, opening right around $10, and the shares have climbed slowly but steadily since, last seen at $10.70 -- up 2.5% this morning to hit fresh highs. Looking closer at the trading action around the SPAC, there was a huge uptick in volume back on May 5 that corresponded with a notable rise in the share price, suggesting a large buy order may have taken place that day.

This arrangement will make Virgin Galactic the first publicly traded human spaceflight company, as those with IPOA stock will receive a 49% stake in the company. According to the press release this morning, the deal puts a pro forma enterprise value of $1.5 billion on the merger, which is two-and-a-half times the expected revenue for 2023.

Many media reports are already suggesting this could spark some type of reaction from (AMZN) CEO Jeff Bezos or Tesla (TSLA) founder Elon Musk, since the former owns Blue Origin, another space tourism venture, while Musk is the CEO of space transportation specialist SpaceX. For those interested in a Virgin Galactic trip for their next potential vacation, a Reuters report from December said a 90-minute flight would cost around $250,000, and there's apparently a waiting list featuring Leonardo DiCaprio and Justin Bieber.

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