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You know the market is getting frothy when people who’ve previously peddled failed ventures are getting second chances.
And in the case of Chamath Palihapitiya, we’re way past chance number two.
The former Facebook executive and venture capitalist is back with a $250 million special purpose acquisition vehicle (SPAC) called American Exceptionalism Acquisition Corp. The new SPAC will seek to acquire companies in AI, crypto, defense, or energy, according to its S-1.
For those of you who don’t remember, Palihapitiya unleashed a slew of SPACs back in their heyday of 2017 to 2021, when they were first gaining popularity as a backdoor method for startups to go public without the traditional IPO process.
Many of his SPACs did not turn out to be particularly lucrative, to put it mildly.
Of the 10 SPACS Palihapitiya launched, four had to return cash to investors because they never found a partner company to merge with. Five of the remaining six were spectacular failures with a median loss of 75%, according to Bloomberg. They include Virgin Galactic, which delivered investors a loss of 99% since its debut; Clover Health, which has lost 76% of its value; and OpenDoor, which boasts a cumulative loss of 66%.
The sole success was SoFi Technologies, which has returned 131% to shareholders since it arrived on the market.
No crying in the casino
At least this time around, Palihapitiya is being up front about the risks involved with investing in one of his SPACs.
In a letter published alongside American Exceptionalism Acquisition Corp.’s S-1 prospectus, Palihapitiya added a disclosure to his latest foray: “We believe that retail investors should only participate if (a) this investment is a small part of an otherwise diversified portfolio, (b) this investment is a quantum of capital they can afford to completely lose and (c) if they do lose their entire capital, they will embody the adage from President Trump that there can be ‘no crying in the casino.’”
Seems Palihapitiya is finally admitting that putting your money on him isn’t investing, it’s gambling.—LB