On Tuesday, a new SPAC from venture capitalist and All-In podcast host Chamath Palihapitiya became a public company. Named “American Exceptionalism,” it raised 345 million dollars with a mission to acquire startups in the fields of energy, artificial intelligence, cryptocurrency, decentralized finance, or defense, and then convert those companies into publicly-traded entities.
However, Palihapitiya strongly advises retail investors not to buy the stock. He has reserved just over one percent of the shares to be traded for retail investors, while 98.7 percent has already been sold to hand-picked, large institutions. He stated that he wants to temper retail investors’ involvement with his SPACs, explaining that these vehicles are designed for institutional investors who can manage the volatility, incorporate the investment into a broader structured portfolio, and have the capital to support the company over the long term.
It is unusual for someone to launch an IPO and then tell people not to buy the stock. He issued a buyer-beware warning to any retail investor who might choose to ignore his recommendation, urging them to carefully review all 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, earning him the title of “SPAC King.” This followed his first SPAC, which took Virgin Galactic public in 2019. SPACs became popular as a fast-track to going public during the venture capital valuation bubble.
Within a few years, data showed that while SPACs were lucrative for their sponsors and sometimes for the acquired startup, they rarely made money for investors. One analysis noted that SPACs have delivered poor post-merger returns to shareholders for many years. Goldman Sachs even banned itself from underwriting them for a period.
In June, Palihapitiya posted a poll on social media asking his followers if he should launch a new SPAC. Nearly 58,000 people voted, with 71 percent voting no. This is likely because his track record is no better than the broader market; a compilation of his previous SPACs showed that many were down over 90 percent from their launch date.
When launching this new SPAC, Palihapitiya argued that SPACs are still good for startups, their employees, and early investor venture capital firms. He cited the growing imbalance between private and public markets, with employees often holding paper wealth that is difficult to convert into cash and early investors finding it hard to reinvest capital.
He acknowledged that the past performance of SPACs has not been all roses, hence his warning to retail investors. He says he is trying to address criticisms that SPACs enrich the vehicle’s sponsors at the expense of everyone else. With “American Exceptionalism,” he has structured payouts so that the sponsors’ stock will not vest until share prices hit significant increases. He stated that if the deal performs poorly, no one wins, but if it is a winner, everyone wins together.
The question remains: with all that is known in 2025, should a startup choose to go public via a SPAC? History would indicate probably not, if they want their stock to perform well over the long term.