The big data analytics company Palantir Technologies has quietly become an aggressive investor in companies going public via SPACs, or special purpose acquisition companies.
A SPAC is basically a management group that raises capital through an initial public offering with the express purpose to make an acquisition. The acquired company becomes publicly traded without the usual IPO process. Companies going public via SPAC often raise additional capital via a structure known as a PIPE, an acronym for “private investment in public equity.” While most PIPE participants are institutional investors, they sometimes include strategic investors.
And that’s where Palantir (ticker: PLTR) comes in.
To date, Palantir has participated in at least eight SPAC-related PIPE transactions, investing well over $100 million, using the deals as a way to win business from emerging companies that can benefit from Palantir’s big data analytics software. In effect, Palantir is providing capital up front in return for a multiyear commitments to use the company’s software.
Shyam Sankar, Palantir’s chief operating officer, says there’s a historic perception that Palantir’s software is only suitable for very large companies and government agencies. “We don’t think that to be true,” he says. “With SPACs, we see a historic opportunity to invest in our customers.”
Sankar says Palantir has invested under 10% of the company’s $2.4 billion in cash on hand through end of March. That figure implies Palantir’s total PIPE spending could be as high as $240 million. Palantir’s latest 10-Q filing with the SEC discloses $132 million in total PIPE investments spread over five deals; that includes a $20 million investment in an unspecified company.
Sankar says Palantir has focused its investments on emerging businesses that should benefit from using Palantir’s software; the company has only invested in about 10% of the deals it sees, he says. The company appears less focused on financial returns from these transactions than in building relationships with potentially significant customers—it’s effectively an exercise in business development. In every deal in which terms have been announced, Palantir is signing a parallel software contract. Sankar says in most cases the long-term value of the contracts exceed Palantir’s upfront investment in the PIPE.
Palantir confirmed its participation in eight SPAC investments to date. Here’s a rundown of the deals:
- So far, the single largest investment is a $41 million stake in Lilium, a German based developer of electric-powered air taxis, 7-seat jets that can vertically take off and land. The company is combining with Qell Acquisition (QELL), a SPAC started by a former General Motors executive. Lillium has signed a five-year contract wight Palantir. Other investors in the $450 million PIPE deal include Baillie Gifford, BlackRock (BLK), Tencent (TCEHY), PIMCO, and others.
- Palantir is investing $21 million in Sarcos Robotics, which makes industrial robots. Sarcos is merging with Rotor Acquisition (ROT). The combination includes a $220 million PIPE deal, with an investment group that also includes BlackRock, Caterpillar Venture Capital, Schlumberger (SLB) and others. Palantir won a six-year software contract from Sarcos.
- Celularity, a company developing pharmaceuticals from human placenta, has a pending transaction to merge with GX Acquisition Corp. (GXGX). In May, the company announced a “multiyear strategic partnership” with Palantir which includes making an investment immediately on the close of the merger. Palantir has invested $20 million in the deal, while Ceularity agreed to a five-year contract with the company.
- Roivant Sciences is a growing collection of pharmaceutical companies which has agreed to merge with Montes Archimedes Acquisition Corp. (MAAC). Investors in the deal’s $200 million PIPE offering also include SoftBank (SFTBY), Fidelity, and Sumitomo Dainippon Pharma, among others. Palantir is investing $30 million in Roivant, which also signed a five-year software contract.
- Babylon Health, which provides app-based healthcare delivery, has agreed to merger with Alkuri Global Acquisition Corp. (KURI). Palantir has invested in the company’s $230 million PIPE transaction, along with Montreal-based Sectoral Asset Management and Stockholm-based Swedbank Robur. (Palantir uses Babylon’s service for its U.K.-based employees.)
- Pear Therapeutics, which provides prescription based digital therapies, is merging with Thimble Point Acquisition (THMA). Palantir’s co-investors in the deal’s $125 million PIPE include SoftBank, Temasek, and Novartis (NVS), among others.
- Boxed.com, is an online retailer of consumer goods sold in bulk, Costco-style. The company is coming public via a merger with Seven Oaks Acquisition Corp. (SVOK). Other investors include Brigade Capital Management, Avanda Investment Management, and Onex Credit.
- Wejo, which provides connected vehicle information services, is merging with Virtuoso Acquisition Corp. (VOCO). Palantir and General Motors (GM) invested in the company’s $100 PIPE offering.
Palantir shares were down 1% Friday afternoon, to $24.48.
Write to Eric J. Savitz at [email protected]
