The tech industry is one thing, but software as a service is about as 21st century as it gets. Palantir Technologies is a big data analytics company that knows this first hand. And in 2020, they’re making the move to go public. Here’s what we know about the Palantir IPO, fundraising at the company, when the projected Palantir IPO date is and what investors should know before becoming a Palantir shareholder.
- Peter Thiel founded Palantir in 2003 and appointed Alex Karp as CEO a year later.
- The company relies heavily on government contracts, working to track undocumented immigrants and missing children, among others. Because of this, their work is often controversial.
- Palantir fundraising has hit billions. One of their earliest investors was In-Q-Tel, the CIA’s investment firm.
- Palantir has an increasing revenue, but because of high research and operating expenses, has yet to turn a profit.
- The Palantir IPO will take the form of a direct listing. This means its ticker will be on the market sooner (possibly as soon as the end of September), but it may pose a greater risk to investors.
- You can learn more about IPOs here.
A quick history of Palantir
The early 2000s recession was said to have been over by the end of 2001, but its residual effects lingered for years. By the start of June 2003, the US Department of Labor reported an unemployment rate of 6.1%, the highest in nine years. Despite these economic woes, some startups managed to launch — and even succeed — in 2003. One of them was Palantir Technologies.
Peter Thiel, venture capitalist and co-founder of Palantir, launched the California-born company in Silicon Valley. Thiel also sits on the board of Asana, a collaborative software company he has invested heavily in. Long before the Palantir IPO, the company began as a government engine to combat cyberterrorism. Today, they continue to uphold values of privacy, though many claim Palantir’s involvement in numerous government projects is concerning.
Just like the company’s offerings — which combine software and customization consulting — the name Palantir is multifaceted. Aside from being an arguably sophisticated Silicon Valley label that kind of sounds like its founder’s name, it’s a reference to a spherical object in Lord of the Rings that lets characters view other perspectives of Middle Earth. That’s pretty metaphorical.
Palantir’s contracts run the gamut, but its software is known for tracking terrorists. While it has never been confirmed, the company never denied their involvement in locating the infamous Osama Bin Laden. Most known for its software called Gotham, Palantir has also used their data capacity to work on mitigating disasters like Hurricane Florence, which hit the Carolinas in September 2018. More recently, the software has been used to track the spread of COVID-19 for the Centers for Disease Control (CDC) and track undocumented immigrants for Immigration and Customs Enforcement (ICE).
Aside from government contracts, Palantir’s partnerships include JPMorgan Chase, Airbus and Ferrari.
While Palantir climbed up the ladder in Silicon Valley, co-founder and CEO Alex Karp noted that the company’s headquarters are moving to Denver, Colorado. In what feels like a bit of an understatement, it seems that Palantir’s personality has outgrown San Francisco — the two entities are butting heads big time.
By August 2020, the US unemployment rate was at 8.4%, a notable decline from earlier on in the COVID-19 crisis, but still undeniably high. And in another bold move during a volatile era, it’s in 2020 that Palantir Technologies has decided to go public. It seems that no market factors can hold this company back from their next move.
What to know about Palantir fundraising
Believe it or not, In-Q-Tel (the CIA’s investment firm) partially funded the company’s software Gotham. The CIA presumably did this with a goal to use Gotham internally. With a $2 million investment, the CIA was one of Palantir’s only early investors, the other being Thiel’s own Founders Fund, who contributed $30 million.
By September 2013, Palantir received $196 million in funding from undisclosed investors. At the time, they were working with a number of governmental organizations, including (but definitely not limited to) the FBI, Marine Corps and National Center for Missing and Exploited Children. Later that year, they sought after $400 million in funding from private investors. It’s unclear whether this big ticket went through.
In 2014, investors valued the company at $9 billion, making it one of the most valuable private tech companies in Silicon Valley at the time. But funding wasn’t over.
- Toward the end of that year, an unknown investor injected $50 million into the company, bringing it to a $15 billion valuation by January 2015. Kenneth Langone and Tiger Global Management were just a couple of private investors reportedly involved with Palantir at the time.
- In June 2015, the company launched a funding round of $500 million. This put Palantir on a platform as the third most valuable startup in the entire country.
- By the end of 2015, Palantir had scored a whopping $880 million from investors. Their new valuation was $20 billion.
By 2018, the company’s valuation had reversed. At the time, Morgan Stanley valued Palantir at $6 billion. But today, that number has supposedly made its way back to $20 billion.
After all is said and done, Palantir holds a veritable 3% stake in the data analytics market — but they do have competitors (like Oracle, for example) and that’s nothing to ignore.
Path to the Palantir IPO
It’s pretty common for an IPO to be confidential — we saw it recently with Airbnb. In a confidential filing, a company doesn’t disclose the details of their IPO, like how many shares will be offered and at what price. But by using the form S-1, or registration statement to the SEC, we can dig up a lot of details.
From 2016–2019, Palantir’s revenue metrics fluctuated, ranging intermittently from $481 million to $853.1 million. But in the first half of 2020 — a year when the stock market saw the largest decline in a single week since the 2008 Great Recession — their revenue had already reached $481 million, meaning it’s very well possible they’ll break the billion mark by fiscal year’s end.
Palantir’s latest private investors proclaimed the company’s valuation was back up to $20 billion, but it’s possible that this number is inflated.
Originally, Palantir had planned to go public last year. But perhaps in part because of surprising IPO results from companies like Peleton, Uber and Lyft — or maybe in hopes of additional private investors — they postponed the transition until 2020.
What’s next for the Palantir IPO?
While the company confidentiality filed, we know that the Palantir IPO is taking the route of direct listing. This should come as no surprise, considering the company’s co-founder also sits on the board of Asana, who filed their IPO at the same time and also chose to go public via a direct listing. Maybe Thiel has a style.
In a direct listing, a company has no underwriters (though they’re sure to have financial advisors). This means there’s no firm agreement where a bank purchases shares and bears the responsibility of courting investors. Instead, the company takes existing shares and sells them to preferred investors on the secondary market. The process is quicker than your average IPO, but the risk for investors is often greater.
Eventually, these shares will make it to the New York Stock Exchange (NYSE), where the company’s ticker symbol will be PLTR.
It’s worth noting that the Palantir IPO did not come with your typical prospectus. CEO Alex Karp writes, “The engineering elite of Silicon Valley may know more than most about building software. But they do not know more about how society should be organized or what justice requires.”
In a pretty straightforward jab at the world’s tech epicenter in California, Karp says that Palantir seems to “share fewer and fewer of the technology sector’s values and commitments.”
That explains why the company is packing their bags at the headquarters and getting out of dodge. Only time will tell if Denver proves itself as a more hospitable habitat for big data on a mission.
When is the Palantir IPO date?
We don’t yet know when PLTR stocks will be available to the public, but insiders say the date will be sometime toward the end of September. Tokyo-based Akita Michinoku Capital says the company may very well change their plans, but we’re sticking with the news until something better comes along. In the meantime, we’ll be keeping our eyes peeled for updated Palantir details.
What investors should know
Yesterday’s revenue does not equal tomorrow’s, and what once rocked your portfolio may fail to do so in the future. As such, it’s important to take a few key factors in consideration when determining whether or not you should invest in the Palantir IPO:
- Despite its revenue metrics, Palantir hasn’t earned a profit in its nearly two decades of business. The company’s operating expenses cost the company $1.08 billion in 2019, a number which we can likely blame on enormous research and development. The gap is beginning to close on their net loss, but they’re not in the green just yet.
- Government contracts are one of Palantir’s primary sources of income, and increasingly so. For the first half of 2020, government contracts made up 53.5% of revenue, up from 45% in 2019. While lucrative, relationships with specific government sectors (like ICE and the CIA) can be troubling for certain investors, particularly those interested in transparent impact investing.
- Palantir is heavily involved in Project Maven, a Pentagon AI project that Google backed out of. Recently, the government’s Defense Department launched a formal inquiry into the project.
- Reportedly, about a third of the company’s revenue comes from just three companies, which is the antithesis of diversification (a factor that can be just as crucial in business income as it is in investing).
None of this is to say that Palantir won’t be a profitable venture for investors, but these facts are critical in developing a holistic view of the company — which is a good practice before investing in any IPO.
Because of their portfolio of classified projects, the Palantir IPO is more controversial than most. All money aside, investors will have to reckon with the fact that this big data analytics company knows a lot, and what they choose to do with that information is their choice. The Palantir IPO is highlighted by a strong revenue but a lacking profit, and with that comes risk. Whatever the outcome, the Palantir IPO date is looming. This direct listing will be on the market in due time — just look out for PLTR come market open.