Chamath lands US$300m for pursuit of American Exceptionalism
Chamath Palihapitiya’s American Exceptionalism Acquisition raised an upsized US$300m last Thursday on its SPAC IPO, marking a return for the one-time blank-cheque kingpin and a continuation of US patriotism.
Santander was sole bookrunner on the pricing of 30m shares at US$10, resulting in an increase from the US$250m initially targeted. The upsize reflected high reverse investor inquiry and came despite the lack of formal marketing. There was a group investor call Thursday ahead of pricing but no one-on-on meetings.
The outcome is a strong endorsement of Palihapitiya’s pitch to pursue a merger target in “four areas [that] … need substantial capital if the United States is to maintain its position as the most important country on earth and the only global superpower”.
Those four areas are energy, artificial intelligence, decentralised financing and defence.
Aiding in that pursuit is the unique structuring of American Exceptionalism.
“The stigma about SPACs is that the founder always wins,” said one SPAC banker. “That is not the case here. [Chamath] can make a lot of money but only if the target’s stock price performs.”
The sponsor promotes vests in three equal tranches, one third at US$15, another third at US$17.50, and the final third at US$20. If all three targets are hit, Chamath would get a 30% stake in the target.
While that is above the 20% typical, the offset is Chamath gets no equity in the target on the downside – as is the case with all SPACs, Chamath paid US$25,000 for the sponsor shares. The 20% promote typically means SPAC sponsors can make money below the US$10 per share merger price.
“Because there is no dilution on day one, there is better alignment with the target’s owners,” said the banker.
American Exceptionalism is a stock-only, in contrast to other SPACs that are structured with warrants exercisable at US$11.50 post-merger or rights that give investors shares if they stay on board after the merger.
The 48-year-old Chamath, who is of Sri Lankan descent and raised in Canada before establishing roots in Silicon Valley as an exec at Facebook, is no stranger to the SPAC game. Through his vision-driven Social Capital VC fund, he has backed 10 SPACs.
That includes the three SPACs priced on the same day in 2021, two of which were liquidated after failing to find a target and the third that merged with diabetes-focused drug developer ProKidney.
The crowning achievement in that SPAC empire was the 2021 merger of Social Capital Hedosophia V with SoFi Technologies, a fintech whose shares have nearly tripled in price since the merger.