Palantir turns into aggressive with SPACs and invests in Babylon Well being
A pedestrian passes a banner with signage for Palantir Technologies in front of the New York Stock Exchange (NYSE) during the company’s initial public offering (IPO) on September 30, 2020.
Michael Nagel | Bloomberg | Getty Images
Last year, Palantir was preparing for its long-awaited stock market debut at this time. Now the data analysis software developer has become a major investor in other technology companies that are preparing themselves for the public markets.
Palantir’s latest investment was announced on Thursday when Babylon Health announced that it was going public through a special acquisition company. A group of investors, including Palantir, have pledged to invest a combined US $ 230 million in the Babylon transaction.
Palantir has now approved at least six SPAC deals in less than three months. A SPAC is a blank check company that raises money to buy a private company through a reverse merger and take it public with the help of funding additional investors. By participating in the PIPE or making a private investment in public equity, Palantir is guaranteed ownership of a certain amount of shares once the transaction is complete and the operating company’s shares begin trading.
While many tech companies like Google, Salesforce, and Intel have large venture groups that support startups at various stages, Palantir’s focus on SPACs is unique among strategic investors. This means that Palantir is betting on more mature companies, often worth billions of dollars.
SPACs hit the market at breakneck speed last year as an alternative to IPOs. However, the market has cooled recently due to regulatory concerns and a general retreat in technology stocks. The CNBC SPAC 50 index, which tracks the 50 largest pre-merger blank check deals by market capitalization, has slumped almost 4% year-to-date, while the Nasdaq is up almost 6%.
In addition to financial returns, Palantir seeks innovative companies in large markets that can leverage its data tools.
Palantir has supported companies ranging from drug discovery to robotics and aviation. Last week it partnered with General Motors for a $ 100 million investment in Wejo, a UK developer of connected vehicle data systems. In March, the company agreed to invest $ 41 million in Lilium, an air taxi company developing a seven-seat, electric vertical take-off and landing aircraft.
“We see an opportunity to support really good management teams with big visions,” said Kevin Kawasaki, director of business development at Palantir. The company can partner and “enable them to leverage our data operating system platform that we have invested 15 years and billions of dollars in R&D in,” he said.
Palantir’s software helps government agencies and large corporations collect, analyze, and visualize vast amounts of diverse data. The company grew up serving the public sector and was best known for providing software and services to intelligence agencies. Since then, it has expanded into the commercial sector, which made up nearly 40% of sales in the first quarter.
Since being directly listed on the New York Stock Exchange in September, Palantir shares have more than doubled in value, increasing the company’s market capitalization to $ 39 billion.
Not just the money
Babylon CEO Ali Parsa said the Palantir investment is part of a longer-term partnership between the two companies. Babylon is working with health insurers and governments to provide them with a way to offer patients mobile services that have much easier and cheaper access to health care providers, be it for primary care, emergency care or a specific procedure.
Parsa founded the company in 2013. Until recently, it mainly focused on Europe, but has also signed agreements with governments such as that of Rwanda where Babylon is helping bring citizens access to primary care. He launched the service in the US in 2020 and, primarily through partnerships with insurers, increased sales five-fold over the past year. He expects that 80 percent of sales will come from the USA in 2021.
Babylon Health home screen
Source: Babylon Health
The SPAC agreement values Babylon Health at approximately $ 4.2 billion and is expected to close in the second half of this year.
Palantir’s technology, Parsa says, can help provide its company and customers with more advanced ways to analyze individual patients to know when they might need to take action or seek specific help. It’s similar to how companies use Palantir to know exactly when their products need an upgrade or update, he said.
“One of the biggest challenges in healthcare is that the huge amounts of data that the human body generates is not being used well at all,” said Parsa.
Parsa said product talks with Palantir were ongoing before any discussion of a SPAC broke out.
“After that, they said they like the business and we want to be an investor in the process,” said Parsa.
Betting on life sciences
Palantir invests significant resources in the health side of its business. Last month, the company hired Dr. Bill Kassler, formerly IBM Watson Health, as the US government’s first chief medical officer. The Food and Drug Administration, Centers for Disease Control and Prevention, and National Institutes of Health are all Palantir customers.
His efforts to work with the UK’s National Health Service on a Covid data collection project have drawn criticism from groups of activists concerned with privacy issues.
Babylon Health is Palantir’s first digital health SPAC, but the company has others in the life sciences as well. On May 1, it agreed to invest $ 30 million in the SPAC for drug maker Roivant Sciences. Palantir said in its quarterly report that Roivant signed a five-year subscription agreement for products and services under the agreement.
Shyam Sankar, operational director of Palantir, said on the conference call on the first quarter results that the company is partnering with Roivant to “work on drug discovery and development across its entire portfolio.”
Four days after Roivant’s announcement, Palantir said it is investing $ 20 million in the SPAC for Celularity, a clinical-stage biotech company. This agreement also includes a five-year subscription to Palantir’s products.
“With Celularity, we will help accelerate the science of their breakthrough cell-based therapies and cutting-edge biotechnology focused on translating biology into medicine,” Sankar said on the call.
Palantir was involved in two other SPAC investments outside of the life sciences between April and May, according to the quarterly report.
The company agreed to invest $ 21 million in the deal for Sarcos Robotics, which makes industrial robotic systems. On May 11th, Palantir agreed to put $ 20 million into a “mobility company” it didn’t name in the filing. Both deals also included multi-year subscription contracts.
CLOCK: Palantir doubles its life science business