Things To Know About Palantir’s IPO
Last week’s barrage of tech initial public offerings (IPOs) has shown that it’s been a banner year for tech stocks. Snowflake (SNOW Stock Report) was one of the top software IPOs of all time to hit the public market last week. Recent IPOs all had strong debuts and have been trading in the positive territory one week after listing. The other names include Unity Software (U Stock Report) and JFrog (FROG Stock Report).
Palantir Technologies will begin trading under the ticker PLTR. The company originally had planned to start trading this week but has since moved the date back to September 30th, 2020. The company was valued at $20 billion after its latest funding round.
It is not floating new stock, although the company effectively raised “IPO money” back in July of about $1 billion from the private market. The target share price for the Palantir IPO has not yet been confirmed. However, from the transactions in the private market, it has a volume-weighted average price per share of $5.35.
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Strong Partnerships With Government Agencies Ensure Revenue Stability
First of all, Palantir Technologies (PLTR Stock Report) focuses on data-gathering and analysis, mostly for government agencies. It generates over half its revenue from secretive data contracts for government agencies like the CIA, Department of Defense, and Immigration and Customs Enforcement. The company expects third-quarter revenue up to $280 million, an increase of 47% with non-GAAP operating income of up to $62 million.
The projected growth in revenue suggests that Palantir doesn’t really depend on the macroeconomic environment at any one time. After all, government spending on national security matters is likely to be sticky regardless of pandemics or trade wars. Palantir initially pitched its tools to the U.S. government to prevent terrorist activities such as the 9/11 attacks. Its solutions aim to pull personal data from various sources and analyze the data in a unified platform.
As such, Palantir could even benefit during times of geopolitical tensions. Now, some of you might shy away from this company due to reservations about ethical issues of data collection. The reality is, the government and big tech companies are going to collect data from you one way or another. You might as well profit from it by owning a stake in these tech companies.
Palantir Stock Investors Won’t Have Significant Voting Rights
According to the latest version of its S-1 filing, the company states its Class A common shares, which will be offered in the direct listing, will only yield a combined 3.4% voting power in the company. Palantir’s Class F shares, held only by its three founders, will control almost half of the voting power. The Class B shares, which are predominantly issued to employees, have 10 times the voting power of the Class A shares.
What’s more, Palantir’s founders are reserving the right to add other classes of shares to their position. According to the filing, the founders could increase their combined voting stake to over 68%. Granted, these types of arrangements may unnerve potential investors. But if you are an individual investor who is not bothered with voting at the stockholders’ meeting, this is probably not a big deal.
Can Palantir Fend Off Potential Competitors?
The company’s main competitors include Splunk (SPLK Stock Report) and Verint Systems (VRNT Stock Report). These are all technology companies that focus on business intelligence or data management. While Splunk may be a more valuable company today, Palantir’s strong relationship with government agencies in major markets makes it one of the best tech stocks to buy when it goes public. Apart from the US, the company has been working alongside other companies in the UK to develop a COVID-19 database for the National Health Service (NHS). The success of these projects would no doubt strengthen the company’s outlook, which is already strong for 2020.
Palantir’s two primary data mining platforms, namely Gotham for U.S. government agencies and Foundry for enterprise clients, run on public cloud services including Amazon (AMZN Stock Report) Web Services (AWS) and Microsoft’s (MSFT Stock Report) Azure. Amazon and Microsoft have existing cloud contracts with a number of U.S. government agencies. Could the tech giants eventually come up with similar tools to disrupt Palantir? With their large balance sheets, you could say that anything is possible. But Palantir has already got a head start, and it won’t be giving that lead away anytime soon.
Can You Get In Before The IPO?
What if I told you that you can get a piece of Palantir before the IPO? Yes, you heard that right. Enter SuRo Capital Corp (SSSS Stock Report), an under-the-radar publicly traded investment fund that invests in high-growth private companies. SuRo holds a small stake in Palantir, which represents 15.3% of SuRo’s portfolio as of June 30th, 2020. Chances are, if Palantir has a blockbuster IPO as Snowflake did, you would expect SuRo to benefit from it. The question is, will the IPO hype stick around for another week?