Delivering Alpha

Chamath Palihapitiya rips airlines again and calls for more money to consumers and small businesses

Key Points
  • Venture capitalist Chamath Palihapitiya said Wednesday that rescue funds should not be directed to poorly run companies
  • Rather than direct rescue funding to large companies, future resources should go to small business owners and individuals, he added.
  • He also spoke about the presidential debate, characterizing it as a "shambolic dumpster fire" that was "so bad" but also was "in some ways … incredibly clarifying."
Chamath Palihapitiya
Olivia Michael | CNBC

If the government approves further stimulus funds, they should go to individual consumers and small businesses, venture capitalist Chamath Palihapitiya said Wednesday.

In a searing diatribe against the troubled sector, the CEO of Social Capital expanded on comments he made earlier in the year to CNBC in which he said airlines should not be bailed out because they are so poorly managed.

Palihapitiya said that before the coronavirus pandemic, the companies already were doing "the most absolutely horrid and idiotic form of capital allocation you could imagine."

"Not a single extra dollar should go to these companies," he added.

Among the poor decisions he cited were not investing in research and development, saving or putting more resources into their workforces. Instead, they focused cash on share repurchases and inflating stock prices.

Chamath Palihapitiya on stimulus: Give money directly to Americans rather than to zombie companies
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Chamath Palihapitiya on stimulus: Give money directly to Americans rather than to zombie companies

"This has been happening for the last 15 or 20 years," Palihapitiya said in remarks at the Delivering Alpha conference, presented by CNBC and Institutional Investor. "If you were going to give these folks money, you should have created some much tighter guardrails for what you were going to do in the future."

Rather than direct rescue funding to large companies, as was done under pandemic-related programs approved by Congress and the Federal Reserve, future resources should go to small business owners and individuals, he added.

"If you really believe in trickle-down economics, then let's actually see how trickle-down economics would work. Give money into the hands of ordinary Americans," Palihapitiya said in remarks similar to those he had made before opposing bailouts for hedge funds and poorly run companies. "What I guarantee you they will do is they will spend."

He spoke amid a tense atmosphere in Washington as Treasury Secretary Stephen Mnuchin and House Speaker Nancy Pelosi, D-Calif., continue to try to hammer out a palatable spending deal for those still impacted by the Covid-19 spread.

At the same time, investors are continuing to parse out the election between President Donald Trump and former Vice President Joe Biden. The two squared off in a raucous debate Tuesday night that, however contentious and unhinged, did not dent investor sentiment as stocks took off in Wednesday trading.

Palihapitiya characterized the debate as a "shambolic dumpster fire" that was "so bad" but also was "in some ways … incredibly clarifying."

"The stock market said this is a do-no-harm election at this point," he said. "They voted with their dollars."

However, he cautioned that politics has become more about brand than substance, even warning that one day reality TV star Kim Kardashian might become president.