A Quick Explainer Of Yesterday's (Kinda) Space IPO

What happens when you smoosh together a SPAC and a space tourism company? Well, as it turns out, $SPCE happens.

Let me explain.

A SPAC is a “special purpose acquisition company,” a public entity that is designed to buy a company that is, say, private, taking it public in the process. Investors put money into a SPAC when it goes public, and then the entity — a formless slug of cash in search of something material to glom onto — buys a chunk of another company that has yet to go public itself.

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The result of this transaction is that, presto, the private company is now public with little of the usual irksome oversight that comes with filing an S-1.

Space?

Now, space tourism. Not much of an industry, yet, but something that folks think is going to be big. If you’ve ever read science-fiction you’ve read about taking off from a planet and experiencing weightlessness. That’s the draw.

Space tourism in our lifetime probably won’t get much further than that, but there’s a good chance that if you have more money than you know how to safely handle than there’s also a good chance you can afford to go to space for a few minutes before we recycle you back into the Earth.

Indeed, here’s how CNN describes the current market for space tourism, through the lens of Virgin Galactic, a company we’ll come back to:

Hundreds of people from 60 countries, including actor Leonardo DiCaprio and pop star Justin Bieber, have paid or put down deposits to fly on one of Virgin’s suborbital flights.

Some of Virgin Galactic’s ticket holders have been waiting over 14 years for their trip. A 90-minute flight, which allows passengers to experience a few minutes of weightlessness, costs about $250,000.

Cool.

Back to our SPAC. The SPAC we care about, Social Capital Hedosophia Holdings, was put together by tech’s Chamath Palihapitiya. Palihapitiya is most famous for having lots of money from his time at Facebook and founding Social Capital, a venture firm that made some interesting deals and later wound up seeding the rebirth of Kleiner Perkins. Regardless, his SPAC announced in June that it would “invest roughly $800 million in Virgin Galactic for a 49% stake,” according to Fortune.