Palantir currently has two classes of common stock. Each Class A share is entitled to one vote, while each share of Class B gets 10 votes and can convert at any time into Class A stock. Palantir has also created a Class F stock. Each share of Class F will have a variable number of votes and can convert at any time to one share of Class B. The Class F stock is meant to give Palantir’s founders — Co-founder and Chairman of the Board Peter Thiel, CEO Alex Karp, and President Stephen Cohen — roughly 50% of total voting power.

The company is largely built on selling software to businesses and organizations — like the bulk of Silicon Valley companies that have recently filed to go public. Its founders hold outsize sway over the company and control half the votes of shareholders even if they sell some shares under a complex arrangement.

And, like many other highly valued tech companies before going public, Palantir has never made a profit.

The filing laid out financial figures sent last week to existing investors including a net loss of $579.6 million in 2019, about the same as in 2018. The first half of 2020 showed improvement, with a $164 million net loss, compared with a $274 million loss in the same period in 2019.

Palantir also has strong — and accelerating — growth. Revenue in the first half of 2020 increased 49% from the same period last year to $481 million. Revenue in all of 2019 totaled $743 million, which was up 25% from 2018.

The improvement comes as Palantir gradually started to look more like a Silicon Valley software company. For years it resisted hiring professional salespeople, but it now touts its sales force. And Palantir used to act more like a consulting company by customizing software, but now it is focused on easy-to-implement software.

Palantir has for years enjoyed a mystique given its work for the Central Intelligence Agency and other national security organizations. Work for governments brought in 53% of its business in 2019.

Its software helps search through and make sense of giant pools of data. In the case of terrorists, it helps establish links between people suspected of terrorism, while on the Fortune 500 level, its software has been used to help track car parts for Fiat Chrysler Automobiles NV and plane parts for Airbus SE.

Still, there are many challenges. Palantir appears to be spending heavily through paying employees with stock. Its $182 million in stock-based compensation expenses were over 50% of its revenue in the first half of 2020.

Investors, meanwhile, have pegged the company’s valuation well below its 2015 apex. Last year the company sold some preferred stock at a price nearly 40% lower than the $11.38 per share it reached in a 2015 investment. Mutual funds that own shares in Palantir have made even steeper markdowns.

The filings detail a complex arrangement between some of Palantir’s co-founders and the company, particularly Mr. Thiel, Palantir’s chairman. Entities tied to Mr. Thiel, the largest shareholder identified in the filing, own more than 328 million shares. And Mr. Thiel, Mr. Karp and Palantir President Stephen Cohen are also poised to stay in effective control of the company, as an unusual structure gives them just under 50% voting control even if they decrease their share holdings.

Mr. Karp — who got a $600,000 travel stipend in 2019 — was recently given stock options for 141 million shares, 20% of which can be exercised if the company goes public.

Palantir Files For IPO, Revealing It Has Never Been Profitable

Palantir, a data analytics company with strong ties to the defense and intelligence communities cofounded by Peter Thiel, filed to go public Tuesday offering rare transparency into the secretive company’s operations and finances.

KEY FACTS

Palantir, whose IPO was one of the most anticipated of the year, reported sales rose 25% in 2019 to $742.6 million, with a net loss that narrowed slightly from $580 million to $579.6 million; it applied to list on the New York Stock Exchange under ticker symbol “PLTR” and filed to go public via a direct listing, meaning it will not raise new capital.

The company revealed that in its 17-year history, it has never been profitable and might never be, saying, “We expect our operating expenses to increase, and we may not become profitable in the future.”

Palantir has two software platforms, one for government agencies and the other for businesses and says it is selective, noting in the filing it generally will not work with businesses or governments “whose positions or actions we consider inconsistent with our mission to support Western liberal democracy and its strategic allies.”

Palantir said its software is used across 36 industries and in more than 150 countries, excluding China, and that its government work is “central to defense and intelligence operations in the United States and its allies abroad.”

The Central Intelligence Agency-backed company has gained notoriety for its secrecy and government ties, its counterterrorism work and also protests over its government contracts, including calls last year to stop providing digital profiling tools to help Immigration and Customs Enforcement with deportations.

Palantir is being valued around $10.5 billion ahead of direct listing as investors question growth story

Sep 9 2020

As Palantir gears up for its stock market debut, the company has a long way to go to convince potential shareholders that it’s worth the $20 billion price tag that investors gave it almost five years ago.

Palantir held a virtual event for investors on Wednesday. The company, whose software helps government agencies and large corporations make sense of vast amounts of data, also released an updated prospectus, indicating that the number of shares outstanding increased in the third quarter, to 1.64 billion from 1.53 billion in the prior period.

Based on an average share price transaction in the latest quarter of $6.45, investors are valuing the company at just over $10.5 billion.

But the numbers are all over the map.

In July, Palantir raised $410.5 million by selling shares at $4.75 a piece, according to the filing, which comes out to a valuation of about $7.8 billion. Transactions during the quarter took place at anywhere from $4.17 a share to $11.50 a share, suggesting a range of $6.83 billion to $18.8 billion.

The math gets even fuzzier when considering that Palantir had a reported valuation of $20.4 billion in 2015, when the share price was $11.38. That price, based on the supplied share count as of Sept. 1, would indicate a current valuation of $18.6 billion.

A Palantir spokesperson declined to comment on the numbers.

What’s clear is that most investors see a company that’s worth closer to $10 billion than $20 billion. If Palantir’s direct listing values it at around the average private market price, the stock will trade at about 10 times revenue, a healthy ratio but less than one-fourth the price-to-sales multiple for companies like Zoom, Datadog, Shopify and Zscaler.

The challenge for Palantir is to convince investors that it’s more of a high-growth tech company than a low-margin consulting services firm. In recent years, private investors turned bearish on the company, with many large funds marking down the price internally as growth lagged and costs soared.

Palantir’s executives focused much of their attention in Wednesday’s presentation on changing the narrative. From its first product launch in 2008 until the last couple years, Palantir had spent heavily on customizing its software for clients, whether large government agencies or big corporations. That approach dates back to Palantir’s early days, when the bulk of its work was with intelligence agencies.

CFO David Glazer said the business operates differently today. Palantir now sells its two platforms, Gotham for government clients and Foundry for the private sector, charging fixed fees with maintenance costs. Airbus and BP are among its largest commercial clients.

Palantir wants investors to concentrate on what the company calls its contribution margin, or the revenue left after subtracting the costs it bears to generate sales. That number climbed to 55% in the second quarter from 18% a year earlier.

Palantir says the rapid margin improvement has come from its ability to deploy the technology faster, requiring less physical work and hand-holding, and by getting existing customers to increase their spending over time.

In the first half of 2020, Palantir’s total revenue jumped 49% to $481.2 million, with just over half its sales coming from government customers. Costs for sales and marketing and research and development dropped, allowing Palantir to narrow its net loss to $164.7 million from $280.5 million.

But Palantir remains a very expensive product that hardly anyone uses — the opposite of Zoom or Slack. It’s not an easy-to-use application that employees try out with a small team and then convince their colleagues to adopt. Rather, Palantir describes its technology as the “central operating system” that companies use for their data.

Palantir has only 125 customers that spent on average $5.6 million each in 2019.

Glazer says the company’s products and sales strategies are “in their infancies.” In its prospectus, Palantir identifies its addressable market as the 6,000 companies with over $500 million in revenue.

But there’s a monstrous gap between 125 and 6,000, and not everyone is sold on Palantir’s story.

Brendan Burke, senior emerging tech analyst at PitchBook, said in an email that Palantir’s “low customer logo count” suggests that “Foundry is not scaling across large enterprises.” He also notes that while the overall business grew almost 50% in the first half of the year, the commercial segment only expanded by 27%, raising concern that the recent level of revenue growth “may not continue to accelerate going forward.”

Employees have a lot at stake in the coming months. As recently as August, Palantir granted 162 million stock options to certain officers at $11.38 a share, the prospectus says. That’s much higher than what investors have been paying of late, and exactly what they were willing to shell out in 2015.

Palantir Stock Extends Its Slide as the Street Loses Confidence in Its Outlook

May 10, 2022

Palantir Technologies shares remain under pressure for the second day following the company’s softer-than-expected first quarter earnings report, which has triggered investor concerns about the data-analytics software company’s ability to meet its goal of sustainable top-line revenue growth above 30%.

For the quarter, Palantir posted revenue of $446.4 million, up 31% from a year ago and just above both the company’s guidance and the Wall Street consensus of $443 million. The company’s second-quarter guidance calls for revenue of $470 million, which fell short of the Street consensus forecast of $484 million, and implies deceleration of top-line growth to 25%.

Palantir made a little news on its post-earnings conference call, announcing the wind-down of a pandemic-era program of investing in small companies going public through special-purpose-acquisition-company deals. Palantir had been investing in PIPE offerings -- private investment in public equities -- for a number of companies involved in SPAC mergers that also committed to buying Palantir software.

According to a filing with the Securities and Exchange Commission, Palantir made $326 million in SPAC-related investments in 2021. The company had $51.9 million in unrealized losses on marketable securities in the quarter, apparently tied to the SPAC program, along with $10.9 million in realized losses. At the quarter’s end, Palantir had $252.6 million of marketable securities on its balance sheet.

While the company viewed the SPAC program as a form of business development, the Street always saw it as an artificial boost to revenue and perhaps not the best use of the company’s balance sheet. On the call, Palantir business development chief Kevin Kawasaki said the company had $39 million in revenue from SPAC-related deals in the first quarter, and that those customers should generate revenue of about $30 million a quarter on a continuing basis. In the latest quarter, those customers accounted for about 19% of Palantir’s commercial revenue. Kawasaki said the company won’t be doing any more SPAC deals.