There are several things special about the IPO of the software company Palantir on Wall Street on Wednesday. The company’s admitting that its technology is being used to kill people is just one of them.
What is Palantir Technologies?
The name Palantir refers to the crystal ball from the Tolkien trilogy ‘The Lord of the Rings’. The company gathers information from a variety of sources, from phone data and financial records to airplane reservations and social media messages. Palantir was founded in the aftermath of the 9/11 attacks. With the help of money from the US intelligence agency CIA, Facebook shareholder and Trump supporter Peter Thiel, along with Alexander Karp and Stanford student Stephen Cohen, baptized Palantir in 2003. Cohen is said to have written Palantir’s first software in eight weeks. Today Thiel is a director, Karp is CEO and Cohen is chairman. They occupy half of the board seats.
Why is Palantir controversial?
We will not encounter Palantir in sustainable funds. In interviews, Karp has admitted that Palantir’s software is used to kill people. In Palantir’s prospectus, that sounds like, “Our software targets terrorists and keeps our soldiers safe.”
The US Immigration Service ICE has significantly increased the number of arrests of undocumented migrants in jobs. This is attributed to Palantir’s clever software and leads to harrowing images of children being separated from their parents. It regularly provokes protests in Palo Alto at the old Palantir headquarters and in Denver at the new one.
What is special about the IPO?
Although Karp has literally and figuratively distanced itself from Silicon Valley with the relocation of the head office, it has taken a tradition from there: by juggling share classes, it has kept firm control. Palantir is pioneering with the F class. According to the prospectus, the number of voting rights of these shares may vary. Only the three founders have F shares. Palantir moves to Wall Street via a direct listing, as previously Spotify and Slack. No new shares are sold.
What are the prospects?
In this corona year, many companies are struggling to provide forecasts for 2020 even now. Palantir not only provides forecasts for this year (turnover + 42%), but also for 2021 (turnover> + 30%). Providing forecasts is prohibited in the US with a classic IPO, but allowed with a direct listing. Due to the contracts that Palantir has concluded with government services and with private companies (Airbus, BP, …), visibility is great. Palantir has never made a profit in its existence, but promises a zero result this year. In the first half of 2020, the data specialist swallowed a loss of 164 million dollars on a turnover of 481 million dollars.
Will the stock immediately skyrocket like Snowflake two weeks ago?
Palantir would start on Wednesday with a reference price of $ 10 and a valuation of $ 22 billion. After numerous private capital rounds, 1.64 billion shares are in circulation, which can amount to 2.17 billion including options. Most of those shares may not be sold this year. Such a lock-up is classic with a regular IPO and unusual with a direct listing. Only 461 million shares could theoretically be offered on Wednesday. The limited supply, combined with the mad demand for software shares – witness the doubling of Snowflake’s two weeks ago – could immediately explode Palantir’s price.
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