Chamath Palihapitiya Spac deal launches amid Uyghur controversy

A Spac backed by tech investor Chamath Palihapitiya has agreed to merge with a healthcare company focusing on kidney disease, the latest move by the dealmaker who stirred controversy this week by saying “nobody cares” about the Uyghurs in China.

Palihapitiya has been a prolific sponsor of special purpose acquisition companies, launching 10 blank-cheque vehicles to capitalise on booming demand. The latest deal between his Social Capital Suvretta III Spac and ProKidney, a therapeutics company focusing on treating chronic kidney disease, values the combined company at $2.64bn.

It is expected to provide $825m in proceeds, including $250m from Palihapitiya’s Spac, which listed on the Nasdaq stock exchange in June 2021.

The deal has $575m in private investment in public equity (PIPE) financing, $125m of which is from Palihapitiya’s venture capital firm Social Capital. Palihapitiya said chronic kidney disease affected his late father and that the merger will provide ProKidney with the capital to continue phase 3 trials into its cell therapy treatment.

The deal comes a day after Palihapitiya said on his podcast that “nobody cares what’s happening with the Uyghurs” in China. “Every time I say that I care about the Uyghurs, I’m really just lying,” he said.

Many companies and investors are facing renewed pressure ahead of the Beijing Winter Olympics after the US and UK announced a diplomatic boycott of the event in light of outcry by human rights groups and others over China’s persecution of Muslim Uyghurs in Xinjiang. The US state department has accused China of “genocide and crimes against humanity” in its treatment of the Uyghurs.

Beijing has denied allegations of mistreatment and encouraged boycotts against foreign companies such as apparel retailer H&M that have spoken out against the use of forced labour in the region.

Palihapitiya, who owns a stake in the National Basketball Association’s Golden State Warriors team, later said that human rights matter. “I recognise that I come across as lacking empathy,” he said, after the Warriors said Palihapitiya did not represent their views.

Marsha Blackburn, a Republican senator from Tennessee, described his comments as “sickening” and “proof the NBA will cozy up to Communist China at all costs”.

Palihapitiya, along with his co-sponsor Kishen Mehta, is set to make $62.5m from the so-called promote of the Spac, according to Spac Research data. Spac sponsors are paid in the form of founder shares, known as a promote, which typically involves taking 20 per cent of the Spac’s equity for a nominal price of $25,000. When the Spac merger is complete, the sponsor’s deeply discounted shares convert.

The deal marks the fifth merger for Palihapitiya’s Spacs, with others including Richard Branson’s space tourism company Virgin Galactic and healthcare company Clover Health.

Investor enthusiasm for Spacs has subsided from last year’s frenzied highs as regulatory scrutiny increased. Investors have been withdrawing their cash at higher rates and Spac withdrawals have risen in recent months as some sponsors struggle to find suitable target companies to take public.

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