Data analytics company Palantir Technologies has released its prospectus to debut on public markets. The company aims to trade on the New York Stock Exchange under the symbol PLTR. Rather than sell shares through an initial public offering, the company intends to debut with a direct listing, the same unconventional route taken by Slack in 2019 and Spotify in 2018.
Over $500 Million Lost in 2019
Given its long history and its size — last September Reuters said the company was targeting a valuation of $26 billion or more — Palantir had been in a position to go public for years, and investors have long waited to buy shares, as they did for Pinterest, Snap and Uber. Home-renting company Airbnb could be next.
Palantir lost $588 million, or $580 million on a pro-forma basis, in 2019, according to the filing. Revenue grew almost 25% from the year earlier while the loss stayed about the same. In the first half of 2020, it lost $165 million, or $175 million on a pro-forma basis.
Named after a magical orb in “The Lord of the Rings” that lets you see across vast distances, Palantir was co-founded in 2003 by Peter Thiel. Thiel became wealthy as a founder of PayPal and an early investor in Facebook, and was a vocal supporter of President Trump’s 2016 election campaign — a rarity among tech luminaries.
The Stock Classes
Palantir has two classes of stock, Class A and Class B, and while each share of Class A stock receives the rights to one vote, each Class B share gets 10 votes. This structure is similar to Facebook. Thiel is the largest holder of Class B shares, owning about 30% of them. Palantir plans to introduce Class F shares as well, and those will have a variable number of votes. The Class F shares are meant to give founders Thiel, Stephen Cohen and CEO Alex Karp just below 50% of total voting power for the stock, essentially giving the founders control over major decisions. This echoes steps taken by other tech giants through the years, including Snap, which sold non-voting shares to investors, as well as Facebook and Google (now called Alphabet), which have introduced multiple classes of shares to maintain founder control.
Karp sought to distance Palantir from the Silicon Valley technology universe in a letter included in the filing, saying that the company’s projects are meant to keep people safe, rather than sell advertising.
With Palantir’s software, clients can clean up a wide variety of data and then display it in various styles to enable many people to explore and take action on it. Recent enhancements enable users to create text documents, analyze data in spreadsheets and view information on maps. The software can run on Amazon or Microsoft’s cloud infrastructure or in customers’ on-premises data centers, and Palantir also offers professional services to help customers use its tools.
The Segments Of Palantir
Palantir has two segments: government, specifically U.S. and non-U.S. government agencies, and commercial customers. But Palantir won’t do business with just anyone. “We generally do not enter into business with customers or governments whose positions or actions we consider inconsistent with our mission to support Western liberal democracy and its strategic allies,” the company said in Tuesday’s filing. For example, Palantir said it does not work with the Chinese Communist Party and does not host its service in China.
About 54% of Palantir’s revenue came from the government segment in the first half of 2020, and at about $257 million, it grew 76% year over year, while commercial revenue was up 27% despite being smaller than Palantir’s government business.
In the first half of the year Palantir had 125 customers, with $1.2 billion in remaining deal value from U.S. and allied government customers on June 30, according to the filing. One government customer represented 11% of total revenue in the first half, and a commercial customer represented 10% of revenue, Palantir said. Palantir’s customers include the U.S. Army, Navy, Air Force, Agriculture Department and Securities and Exchange Commission.
Palantir declined to name the companies that it sees as rivals. Instead it said that “large enterprise software companies, government contractors and system integrators” represent competition.
Last week, the company disclosed it is moving its headquarters to Denver from Palo Alto, Calif. CNBC included Palantir seven times on its annual Disruptor 50 list, and investors have included Thiel’s Founders Fund, Fujitsu, RRE Ventures and In-Q-Tel, the U.S. intelligence community’s not-for-profit investment group.
Palantir follows a flurry of filings for initial public offerings and direct listings from technology companies. On Monday Amwell, Asana, JFrog, Snowflake, Sumo Logic and Unity Software all filed to go public.