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Palantir Technologies headquarters in Palo Alto, Calif.
David Paul Morris/Bloomberg
Palantir Technologies opened for trading Wednesday at $10 a share, about in line with recent expectations, giving the big-data analytics company an initial valuation of about $22 billion. The stock ends its first day at $9.73, down slightly from the first trade, on huge trading volume of 335.5 million shares.
Earlier in the session, the stock traded as high as $11.41. The stock was up 7.9% at $10.25 in premarket trading Thursday.
While $10 was well above the “reference price” of $7.25 a share announced last night by the New York Stock Exchange, the opening trade was in line with a recent Wall Street Journal report that had anticipated an opening price of $10 a share.
Founded 17 years ago by a group of former
PayPal
execs, including current CEO Alex Karp and the venture investor Peter Thiel, Palantir provides software tools to help companies, nonprofits and government agencies analyze data sets. (The name is a reference to magical stones in J.R.R. Tolkien’s Lord of the Rings books.)
The company attracts scrutiny for its work with U.S. intelligence agencies, but Palantir also works with a range of commercial businesses. Palantir has two primary products: Palantir Gotham, a platform to “integrate, manage, secure and analyze all of your enterprise data,” and Palantir Foundry, which the company describes as “a platform that re-imagines how people use data by removing the barriers between back-end data management and front-end data analysis.”
Peter Thiel, who made a fortune as an early investor in
Facebook,
is a co-founder of the company, and remains one of the company’s largest shareholders. Palantir raised $2.6 billion in venture capital, according to Crunchbase. Investors in the company include the Japanese insurance company
Sompo Holdings,
Fujitsu, Thiel’s Founders Fund,
Morgan Stanley,
BlackRock
and Tiger Global, among others.
Last week, Palantir (ticker: PLTR) provided financial guidance for the third quarter ending Sept. 30, the full year, and next year.
The company projects third-quarter revenue of $278 million to $280 million, up between 46% and 47%, with non-GAAP operating income of $60 million to $62 million, excluding $54 million in expenses related to the listing, stock-based compensation, and related payroll expenses.
For the full year, the company sees revenue of $1.05 billion to $1.06 billion, up between 41% and 43%, with non-GAAP operating income of $116 million to $126 million. The company expects 2021 revenue growth of more than 30%. That suggests the stock at the opening has a valuation of about 16 times projected 2021 revenues. That’s higher than established software companies like
Microsoft
(MSFT) and
Salesforce.com
(CRM), but far below the current valuations for fast-growing companies like
Snowflake
(SNOW) at more than 100 times sales and
Zoom Video Communications
(ZM) at about 60 times.
In an interview with Barron’s, Palantir COO Shaym Sankar said the decision to take the company public via a direct listing reflected the fact that the company did not need any primary capital. He said the direct listing gave the company more control over the process, and was the right thing to do for both employees and investors.
Sankar noted that just under 80% of the company’s shares outstanding are subject to a 180-day lockup period, a decision he says provided some clarity for institutional investors on how many shares will be available and when.
As Sankar notes, the company’s business focuses on large engagements with both commercial and government clients. He says revenue is about equally split between the two categories. The company generally builds deep relationships—he notes that annual customer contract value last year was $5.6 million, growing about 30% a year—and for the top 20 customers, annual contract value is close to $25 million. He says the company sees huge opportunity, with current relationships with just six of the Fortune 100, and 21 of the Global 300.
While the company continues to attract critics over its long-term relationships with governments generally and intelligence agencies in particular, Sankar said the company’s roots were in the days after the Sept. 11 attacks in 2001, trying to prevent government overreach. He says the company has a long history of engaging with privacy and civil liberties advocates and notes that the company has multiple customers in Western Europe, which generally has stricter privacy standards than the U.S.
Sankar notes that the Covid 19 pandemic has accelerated the company’s growth and that the inability to travel has not proved to be a major impediment. He notes that the company had 83 new customers engagements in just the first three weeks of the pandemic without anyone ever getting on a flight. “The crisis has been a huge tailwind for the business,” he says.
For the fourth time now, the NYSE reference price hasn’t proved especially helpful in projecting the first trade. In the other direct listing on Wednesday, the NYSE a reference price of $21, and the stock began trading at $27. The most recent previous major direct listing was
Slack Technologies
(WORK) in June 2019, which had a reference price of $26, and opened for trading at $38.50. For
Spotify Technology
(SPOT), which listed in April 2018, the reference price was $132, and the first trade came at $167.
A reference price isn’t the same as the IPO price in a conventional offering. In an IPO, the shares to be sold in the offering are exchanged at the stated price. But zero shares are traded at the reference price in a direct listing. As one IPO market observer told Barron’s, “The reference price is totally useless and always based on the last private market trades.”
The reference price is about in line with recent private market trading in Palantir shares. Note that the majority of the company’s stock is subject to a six-month lockup agreement, a measure intended to reduce volatility in early trading.
Write to Eric J. Savitz at [email protected]
