King of SPACs Palihapitiya: Private equity is dead, the new SPAC revival will rejuvenate the US IPO market

The well-known Silicon Valley entrepreneur Chamath Palihapitiya, known as the “King of SPACs,” bluntly stated in the All-In Podcast on 10/7 that private equity is dead, with returns nearly dropping to zero, and that future funds will shift towards private credit. The mechanism of the new generation special purpose acquisition company (SPAC) that he leads is expected to revive the stagnant U.S. IPO market.

It is lamented that private equity has died, and the market has entered a period of declining returns.

The program started by showing a chart, illustrating that the global private equity (PE) acquisition fund size surged from 0.6 trillion dollars in 2005 to nearly 4.7 trillion dollars by 2024, with an average annual growth rate of 11%, but has stagnated in the past year.

At the same time, the fund's “cash recovery and investment ratio” has repeatedly fallen below 1 times since 2020, indicating that the cash returned to investors is less than the amount invested, showing that the private sale market is entering a period of declining returns.

Palihapitiya said directly after seeing it:

I think private equity is dead, the whole industry is not doing well.

Zero interest rates create bubbles, private equity surges threefold and then drops to zero.

Palihapitiya pointed out that since 2015, the scale of global private equity funds has surged nearly three times in a long-term low interest rate environment.

Due to the excess of market capital and interest rates being nearly zero, investors are abandoning the traditional “60/40 bond-stock” stable allocation in pursuit of returns, turning to high-risk assets such as venture capital (VC), PE, and hedge funds.

He explained that zero interest rates allow private equity funds to borrow money almost “endlessly,” resulting in leveraged short-term returns far exceeding other investment categories. However, as more and more capital flows in, assets become overpriced, and management efficiency declines, it ultimately leads to an overall return drop to zero.

Private equity returns have dried up, and funds are shifting towards a new bubble in private credit.

Palihapitiya stated that evaluating private equity funds cannot only consider the internal rate of return (IRR), but must also look at the “distributions to paid-in” (DPI). If the distribution is zero, it indicates that the fund is in trouble.

He pointed out that in recent years, private equity funds have almost no capital recovery, with liquidity drying up and funds gradually withdrawing, leaving only a few established institutions like Silver Lake still performing. The capital that has withdrawn is now flooding into the Private Credit market, which involves directly lending to companies and profiting through high interest rates.

But Palihapitiya stated that the current expansion rate of private credit and the overheated situation “looks just like private equity back in the day,” which may be nurturing the next bubble.

Private equity funds never exit, the risk of continued fund proliferation

Currently, more and more private sales and venture capital institutions are using the so-called “Continuation Funds” (, which means selling the same batch of assets to another group of investors to restart the investment cycle.

Palihapitiya believes that this causes assets to never exit the market, leading to funds being locked and a lack of liquidity, which distorts the entire ecosystem.

The IPO market is failing, and SPAC reverse mergers have become a new solution.

Palihapitiya bluntly stated that the U.S. IPO market is completely dysfunctional. He reviewed three public methods: traditional IPO, direct listing, and SPA.

First, traditional IPOs allow investment banks to take a commission of 6% to 8%, and the stocks are undervalued, followed by a surge on the first day of listing and then a drop. Direct listings have the highest transaction price on the first day, followed by a continuous decline, with Slack and Coinbase as examples.

In contrast, while SPAC reverse mergers have had successes and failures, he emphasized that this mechanism has helped American companies raise over $150 billion to $200 billion, proving to be an alternative that can challenge traditional IPOs.

Launch of the new version of SPA Raptor 2, rewards come with success.

Subsequently, Palihapitiya stated that the new generation SPAC plan “Raptor 2” he is promoting focuses on reducing costs and strengthening accountability mechanisms. Only when the acquisition is successful and the company generates actual returns after going public can the sponsors and management team be compensated. This design links investment returns directly to outcomes, effectively enhancing trust and attracting more quality companies to return to the public market.

He added that nearly all the investors participating in Raptor 2 come from top global institutions, with 98.7% being A+ level investors. The common belief among these institutions is: “Good companies should go public, allowing everyone to participate in the investment.”

Raptor 3 is in progress, integrating funds to allow companies to go public fairly.

Speaking about the next steps, Palihapitiya announced that they are preparing “Raptor 3”, which will further integrate funding sources and pre-allocate trading structures. He said:

“In the future, I may raise 1 billion, 2 billion, or even 3 billion USD at once, consolidating all the funds into a pre-designed plan that allows companies to go public at a fair price directly.”

He believes that this design can avoid the efficiency issues of traditional private sale investment public equity )PIPE( structures, revitalizing the U.S. IPO market and creating a healthier listing environment for high-quality companies.

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