Palantir Shares Go Up in Wall Street Debut

Palantir Shares Go Up in Wall Street Debut

2020-09-30 22:15:45
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Palantir Technologies, a company that helps government agencies analyze vast amounts of digital data, saw its shares jump in its Wall Street debut on Wednesday in a sign of continued investor excitement for money-losing software companies.

The company’s shares began trading at $10 on the New York Stock Exchange, a 38 percent increase from a “reference price” of $7.25 set Tuesday evening, and closed the day at $9.73.

Palantir is one of many companies rushing to go public before the election on Nov. 3. It hit the market the morning after a presidential debate seemed to foreshadow political turmoil that could rattle investors in the coming months.

Still, as the rest of the American economy has struggled with mass unemployment and the closing of businesses big and small, Wall Street has been welcoming to new public offerings. The three months that ended with September were the busiest quarter for initial public offerings in 20 years, with 81 offerings set to raise $28.5 billion, according to Renaissance Capital, which tracks I.P.O.s.

Shares of Asana, a collaboration software provider, and Velodyne, which makes sensors for self-driving cars, also began trading on Wednesday. Asana’s stock rose, valuing the company at $4.4 billion, up from its last private valuation of $1.5 billion, while Velodyne’s stock fell 24 percent to $18.69.

Recent successful debuts have included the gaming company Unity Software, the software provider JFrog, and Snowflake, a business technology company whose value increased more than fivefold in its initial public offering this month.

Airbnb, DoorDash and several other tech companies are also expected to go public in the coming months.

Investors embraced Palantir despite its inability to turn a profit and the many controversies swirling around it. Among them is the highly unusual way Palantir has kept most of its corporate voting power in the hands of three founders, including Peter Thiel, a venture capital investor and member of Facebook’s board.

Wall Street valued the company at $21.4 billion, a slight increase from a private valuation of $20 billion.

Mr. Thiel is the company’s largest individual stockholder, owning just over 15 percent, followed by Mr. Karp’s 5 percent and Mr. Cohen’s 2 percent. The company’s structure places an enormous amount of voting power in their hands. Holding special Class F founder shares, the three will retain nearly 50 percent of the voting power in perpetuity, even after selling most of these shares.

“We have seen something similar with companies like Google and Facebook, but this is a far more extreme way of consolidating control in the hands of the founders,” said Anita Dorett, associate program director with the Investor Alliance for Human Rights, an organization that also alerts financial investors to other business risks, not just threats to human rights.

Palantir’s largest institutional shareholders include the Japanese insurer Sompo Holdings; Mr. Thiel’s firm, Founders Fund; Disruptive Tech Solutions; UBS; and 8VC.

Palantir and Asana went public through a “direct listing,” another unusual approach that has become more common among tech companies in recent years. In a direct listing, a company does not issue new shares to raise capital but merely floats existing shares and lets the market determine their price.

A direct listing rewards company insiders who hold shares, since it does not require a lockup period for selling. But Palantir opted to bar employees from selling most of their shares until a later date anyway — yet another way that the founders have exerted greater control over its Wall Street debut.

“Palantir makes clear that the ‘cookie cutter’ approach to new listings is over and done,” said Lise Buyer, founder and managing partner of the Class V Group, a firm that advises companies on initial public offerings.

Because of problems with the Morgan Stanley software that Palantir used to trade shares, trades were delayed for many employees until about an hour before the close of the market.

Palantir has not turned a profit since it was founded in 2003, losing about $580 million in each of the last two years. But its revenues grew 25 percent last year, rising to $742.5 million, and the company said last week that it expected they will increase about 41 percent this year to $1.05 billion.

In an interview on Wednesday, Mr. Karp said he believed that going public would help Palantir reassure its customers that they were working with a financially stable company. “Transparency around our financials is really going to help us” add to contracts, he said.

Funded in part by In-Q-Tel, the investment arm of the Central Intelligence Agency, the company created technology to help the C.I.A. and other government agencies gain new insights from vast amounts of digital data, like internet traffic and cellphone records.

The company has become a significant government contractor. Last year, Palantir was awarded a contract that could be worth over $1.7 billion to create an intelligence analysis system for the Army. This spring, it began working with the Centers for Disease Control and Prevention to track the spread of the coronavirus.

Though it has historically worked with the government, more than half of Palantir’s revenues now come from commercial businesses like Airbus and Ferrari.

Even before going public, the company attracted considerable controversy over its work with Immigration and Customs Enforcement. Under orders from the White House, ICE is using Palantir technology to help find undocumented immigrants, according to recently released federal documents.

Through the process of going public, Mr. Karp has been defiant. Palantir’s offering prospectus opened with a manifesto that railed against the values of the “engineering elite of Silicon Valley,” arguing that they don’t understand “how society should be organized or what justice requires.”

In meetings with investors ahead of Palantir’s listing, Mr. Karp made it clear that he was not interested in investments from people who disagreed with him on controversial issues.

Those investors, he said during an online presentation this month, could “pick a different company.” On Wednesday, many picked Palantir.


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