Chamath warns retail investors to avoid his new SPAC

Summary

On Tuesday, a new SPAC from VC and All-In podcast host Chamath Palihapitiya became a public company. Dubbed with the lofty name “American Exceptionalism,” it raised $345 million with a mission to acquire one or more startups in the fields of energy, AI, crypto/DeFi, or defense, then convert those companies into publicly-traded entities. But Palihapitiya wants retail investors to know: he strongly advises you not to buy the stock, even though he has reserved a tiny fraction — just over 1% — to be traded on the public markets for retailer investors, while 98.7% has already been sold to hand-picked, large institutions. “I want to temper retail investors’ involvement with my SPACs,” he posted on X and later posted again, “We designed it this way, almost entirely institutionally backed, because, as I have learned, these vehicles are not ideal for most retail investors. They are for investors who can underwrite the volatility, place it as part of a broader structured portfolio and have the capital to support the company over the long run.” It isn’t typical for someone to launch an IPO and then tell people not to buy the stock. He even goes as far as to give a buyer-beware warning to any retail investor (like among fans of the uber-popular All-In pod) who wants to ignore his recommendation and buy anyway. “For anyone in the retail market who still chooses to disregard my advice to avoid SPACs, please carefully review our disclosures and make a fully informed decision.” The reason for these warnings is somewhat entertaining. Palihapitiya practically single-handedly sparked the rise of SPACs from 2019 to 2021, granting him the title of “SPAC King.” This came after his first SPAC, Social Capital Hedosophia Holdings (IPOA), raised $600 million and took Virgin Galactic public in 2019. (It now trades for under $4, by the way.) SPACs took off, seen as a fast-track to going public during the venture capital valuation bubble. But, within a few years, the numbers showed that while S...