Friday, September 15, 2017

Why Onerous SEC Regulations Has Caused One Silicon Valley Group to Decide to Invest in a Unicorn

Axios reports:

Venture capital firm Social Capital wants to make going public cool again, this morning raising $600 million in an IPO for a blank check acquisition company that is designed to eventually acquire a tech "unicorn."

Unicorn? That's the Silicon Valley term for a privately-held startup valued at $1 billion or more.

Why it matters: There is a glut of highly-valued and well-capitalized startups that have avoided going public, often to avoid both the hassle of an IPO and the scrutiny that comes with being listed. The trend has frustrated a lot of startup employees and investors, who want to convert their equity into into cash. Social Capital hopes its approach can help alleviate the pressure.

The argument: Chamath Palihapitiya is founder of Social Capital and CEO of the blank check vehicle, named Social Capital Hedosophia Holdings. He believes that "this whole [IPO] process sucks," and that a unicorn would be attracted by the opportunity to go through a much less distracting 60-90 day merger process. Moreover, it offers faster liquidity to employees and other early shareholder, since lock-up periods can be waived...

"When the S-1 got filed, at least 15 of the most prestigious unicorn and bigger public company CEOs called me," [said Palihapitiya].

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