Palantir Becomes Major SPAC Investor, 10 Deals in Q2 2021
Palantir Technologies, a big data analytics company used by U.S. government agencies and many large corporations, is becoming a major investor in SPACs. SPAC is an acronym for special purpose acquisition companies. Another name for a SPAC is a blank-check company. SPACs have attracted investment interest from a wide variety of investors.
In the second quarter of 2021 alone, Palantir participated in approximately 10 SPAC deals. Going into the third quarter, Palantir has continued its SPAC investment streak. It has allocated over $60 million to SPAC deals. Overall, Palantir has allocated at least $300 million to investments in SPACs. While large institutional investors and large venture groups have participated in numerous SPAC deals, Palantir’s focus on SPACs is unique among strategic investors.
Private Investment in Public Equity (PIPE) Deals
A special purpose acquisition company (SPAC) is a publicly-traded entity that must merge with another company, typically within 24 months of becoming a publicly-traded vehicle. The SPAC entity is a shell company and does not have its own operating business. The SPAC will look for a privately-held operating company to merge with. The combined company that results from the merger serves as an alternate route to the traditional IPO process to take companies public.
SPACs are often faster to complete and offer more pricing clarity. During the first half of 2021, global SPAC deal volume exceeded the record level set in 2020. Palantir was part of the trend.
In order to obtain sufficient financing to merge with a private company, SPACs often get PIPE financing. A private investment in public equity, more commonly known as a PIPE deal, involves allocating shares to certain large investors in the company that will result from the merger and go public. PIPE deals are an alternate route for a company to raise capital, and they give accredited institutional investors access to SPAC deals at below-market prices.
The PIPE transaction often forms a critical component of the overall SPAC merger. PIPE investors bridge the funding gap and provide deal validation. It can bolster a SPAC deal’s prospects to have a few prominent corporate or institutional names behind it. By participating in the PIPE deals of these SPAC mergers, Palantir will acquire ownership of a certain amount of stock once the merger closes.
Large mutual funds have been particularly active PIPE investors in SPAC deals. Fidelity, BlackRock, Federated Hermes, and Franklin Templeton are among some of the largest PIPE investors in SPAC deals.
Palantir’s SPAC Investments
As a PIPE investor, Palantir has invested in several SPACs. Following these PIPE investments, Palantir enters into commercial contracts with each company to have them subscribe to and use Palantir’s products and services.
Palantir has particularly focused on investing in SPAC deals involving life sciences companies. The big data analytics company made a commitment to invest $20 million in the SPAC for Celularity, a clinical-stage biotech company. Palantir also made an investment in the SPAC for Babylon Health, a digital-first health service provider powered by artificial intelligence. Finally, the company invested $30 million in the SPAC for Roivant Sciences, a drugmaker. In return, Roivant Sciences signed a 5-year subscription contract for Palantir’s products and services.
Rationale Behind Palantir Deals
Shyam Sankar, Palantir’s Chief Operating Officer, explains the strategic rationale behind these SPAC deals. The Roivant partnership was intended to help Palantir “work across their portfolio on drug discovery and development,” stated Sankar. “With Celularity, we’re going to help accelerate the science around their breakthrough cell-based therapies and a cutting-edge biotech that’s focused on translating biology into medicine.”
Palantir is focused on the healthcare industry. The company recently hired Dr. Bill Kassler as its first U.S. government Chief Medical Officer. Dr. Kassler formerly worked at IBM Watson Health. Palantir has been using its data analytics software to partner with the U.K.’s National Health Service, as well.
Beyond life sciences, Palantir has been investing in tech-related SPACs. Palantir invested $21 million in the SPAC for Sarcos Robotics, which signed a multi-year commercial contract with Palantir to use its products and services. Wejo, a British connected vehicle data startup, received a PIPE investment from Palantir in its upcoming SPAC deal. Palantir also recently invested in the SPAC deal for BlackSky, a geospatial intelligence, imagery, and data analytics company. BlackSky and Palantir are partnering on a pilot program to provide real-time insights by combining data analytics with high-resolution imagery of space satellites.
Palantir continues to be a rapidly growing company. Its SPAC investments provide another route for Palantir to generate high investment returns and as an opportunity to form strategic partnerships with high-growth tech companies in the process of going public via SPAC mergers.