Chamath Palihapitiya
Brian Ach/Getty Images for TechCrunch
Chamath Palihapitiya said he isn’t responsible for the poor performance of so-called blank check companies.
Instead, the venture capitalist blamed Fed policy for causing the market rout this year, according to his recent interview with the NYT.
“That is not in the control of one human being except Jerome Powell,” he said at a conference in October.
The Fed crushed the bubble in special purpose acquisition companies, Chamath Palihapitiya said, deflecting blame for the poor performance of companies he took public in recent years.
“Nobody forced anybody to invest in anything,” the venture capitalist, who is also known as the “SPAC King,” told the New York Times, adding that Fed rate hikes ended the era of cheap money that allowed so-called blank check companies to thrive.
The comments doubled down on his previous attempts to pin the responsibility on the central bank and its chairman.
“The long-term regime in which we operate has changed,” he said at a conference in Manhattan in October. “That is not in the control of one human being except Jerome Powell.”
Palihapitiya was a prominent booster of SPACs – shell companies that raise capital to expedite the IPO of an existing company, often with less regulatory oversight. He used SPACs to bring 10 businesses public, including Virgin Galactic, Opendoor, and his own SPAC in 2017, Social Capital.
He amassed a large following as stock prices for those firms skyrocketed, with Virgin Galactic gaining 440% and Opendoor gaining 246% by February of last year. He would later sell off his own shares, months before a steep sell-off in the SPACs.
Most of Palihapitiya’s SPACs went public during the pandemic, when ultra-low interest rates and ample liquidity in the market caused the boom in meme stocks and other volatile assets. That was a “perverted” and “distorted” marketplace created by the Fed, he said earlier this year, criticizing the low interest rates that allowed speculation and SPAC companies to take hold of investors.
But the Fed has raised interest rates 375 basis points so far this year in a scramble to rein in inflation. That rapid pace of tightening has weighed heavily on markets this year, and amped up anxiety that the Fed could squeeze the economy into a recession.