On Tuesday, the new SPAC of VC and all-in-podcast host Chamath Palihapitiya became the public company. Called the lofty name “American Exceptionalism,” it raised $345 million on its mission to acquire one or more startups in the fields of energy, AI, cryptography/defi or defense, and convert those companies into publicly available entities.
However, Palihapitiya wants retail investors to know. He strongly recommends not buying shares despite booking just 1% to trade in the open market for retail investors, but 98.7% is already sold to large, hand-picked institutions.
“I want to ease retail investors' involvement in Spack,” he posted to X, and later posted again.
It's not typical for someone to fire an IPO and tell people not to buy stocks. He even gives buyer beware warnings to retail investors (like super popular all-in-pod fans) who ignore his recommendations and want to buy anyway. “Anyone in the retail market who chooses to ignore my advice to avoid spacks should carefully review our disclosures and make an informed decision.”
The reasons for these warnings are somewhat interesting. Palihapitiya has effectively caused the rise of SPACS from 2019 to 2021, giving it the title of “Spac King.” This came after his first SPAC, Social Capital Hedosofia Holdings (IPOA). In 2019, it raised $600 million and won Virgin Galactic Public.
However, within a few years, the numbers showed that SPACS was advantageous for SPACS sponsors like Palihapitiya, and sometimes for acquired startups, it rarely makes investors' money. Or, as the Yale Journal of Regulation states, “SPACS has had insufficient returns for shareholders after the merger for many years.”
Goldman Sachs banned it from undertaking for three years. In June, it abandoned that ban and began using SPACS again, urging Palihapitiya to ask X for the X poll.
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Nearly 58,000 people voted, and the overwhelming vote was voted (71%). This is because Palihapitiya's track record was not good. In June, MarketWatch compiled a record of almost every awful performance in his SPAC.
When launching this new SPAC this week, Palihapitiya claimed that SPAC is suitable for startups, their employees and early investors VCs.
“The reason I'm back now is simple: the imbalance between the private and open markets is only growing,” he writes in X, citing even more unicorns than in 2019.
But he also admitted, “It wasn't all roses.” So a warning to retail investors. (Social Capital declined to comment further.)
He says he is trying to deal with some of the worst criticisms. That is, at the expense of everyone else, the Spack enriches the sponsorship of the vehicle.
In “American Exceptionalism,” he makes up payments, so sponsored stock prices do not grant rights until the stock prices increase by 50%, 75%, or 100%. “If the deal is a dog, no one wins. If that's the winner, we all win… we win together,” he wrote.
Questions remain. If you have everything you know in 2025, startups should choose to publish it via SPAC. The history is as follows: Perhaps it's not if they want their stock to perform in the long term.