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I was confused by Hedosophia's value proposition after reading that earlier article as well, but NYTimes seems to do a better job of explaining it.

> "For all this, he takes a tidy fee: 20 percent of the $600 million. But if his company acquires a business five to 20 times its size through a reverse merger, he said, the fee is the same as or smaller than a banker’s fee — and it is all in stock, so unlike the banks, Mr. Palihapitiya’s interests are aligned with the company’s."

Ie, the banks charge 7% of the startup's IPO valuation, whereas Hedosophia's sponsors charge a flat 20% of the $600M, regardless of the valuation of the startup it buys. According to the above math, if Hedosophia reverse-merges with a $3B unicorn, the effective fee would only be 4%.




That's not correct. The bankers' fee is 7% of the money raised in the IPO, not of their total valuation.

Matt Levine addressed that one too: https://www.bloomberg.com/view/articles/2017-09-19/memory-mo... Can't see how to link into the article but if you ctrl-f Hedosophia you'll see his point.


Thanks for the link. I'll admit that I'm not an expert in IPO-finance, and I'm surprised that Andrew Ross Sorkin and Matt Levine are saying such diametrically opposing things. There's probably some nuance to their disagreement that I'm missing.




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