Why Has Chamath Palihapitiya Sold 15% of His Stake in SoFi?

The billionaire venture capitalist has sold a significant amount of shares in SoFi, but why has he done this, and should you follow suit?

Nov. 19, 2021

Canadian billionaire Chamath Palihapitiya sold off 15% of his stake in SoFi Technologies Inc. (NASDAQ: SOFI), confirming the news yesterday in a lengthy tweet. The tweet outlined some of his views on the market as a whole following the Q3 earnings cycle. Palihapitiya alluded to certain markets, such as software as a service (SAAS) and cryptocurrency, being at all-time highs, while simultaneously warning his followers about the concerning rise of inflation rates.

Palihapitiya informed his followers that in order to capitalize on certain areas that he felt were “ripe for opportunity,” he would be selling off some of his SoFi stock in order to generate cash reserves. Let’s take a closer look at just what opportunities he was referring to.

So what did Palihapitiya do?

“So what do I do? Sell down? Invest more? Reallocate from public to private markets?”

Thankfully we weren’t left waiting too long for an answer to Chamath’s question, as the solution came in the very next sentence. 

“To that end, I decided to sell ~15% of our stake in SoFi to build up some cash reserves and fund several new investments.” 

This sweeping statement saw shares in SoFi drop by over 2%. However, Palihapitiya was quick to reiterate his commitment to the company by highlighting that he remains a significant investor and that he’s extremely excited for its future development.

But if he’s taking his money out of SoFi, even though he thinks it’s still a promising company, where is he planning on investing his newly freed-up cash?

What companies is Chamath Palihapitiya investing in??

Palihapitiya name-dropped four specific companies that he plans to invest these funds into.

Mitra Chem is a North American startup that creates iron-based cathodes for battery technologies specifically within the U.S. market. It aims to wrest back some of the control in an industry currently dominated by China. With an increased focus on battery technology, particularly as interest in the electric vehicle (EV) industry continues to grow, Mitra Chem certainly has the potential to be a huge winner for Palihapitiya.

Spectral develops infrastructure for assessing credit risk in the evolving global internet space, building on the growth of blockchain technology and the rise of Web 3.0. As one partner at Palihapitiya’s Social Capital firm put it, “Spectral is an innovator that’s leveraging blockchain technology to transform the way credit scores are calculated. We believe the company is a true game-changer for creditworthiness and look forward to propelling them forward on what we deem to be an exciting growth trajectory.”

Syndica is another company based around Web 3.0, as it develops cloud-based infrastructure and advanced developer tools for companies looking to integrate with the Solana blockchain system. It’s clear that Palihapitiya is exceptionally bullish on blockchain technology and views it as one of the biggest growth opportunities around right now. This should come as no surprise for a man who has put hundreds of millions into Bitcoin already. 

Finally, Palihapitiya announced that he would be increasing his existing investment in Clover Health through its primary offering. Clover Health is a provider of affordable healthcare plan’s aimed at senior citizens in the U.S. With populations continuing to get older and older, this move might prove to be quite smart over the next 10 years.

So should I invest in these companies too?

Chamath Palihapitiya is undoubtedly quite a successful investor and venture capitalist. However, he employs a highly risky strategy in order to make a profit. While his results are definitely enviable, we’d highly suggest avoiding following his exact trades even if you have exceptionally high risk tolerance. Of course, if you think these companies are interesting and have potential you should do your due diligence and research them before investing. But if that’s not quite your style, we here at MyWallSt can do some of the heavy lifting for you.

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