The controversial data-mining-software company Palantir Technologies could be valued at as much as $22bn when it goes public next week.
Bankers told the Wall Street Journal that the company’s shares could start trading at $10 each when it begins trading on the New York Stock Exchange on Tuesday, giving the company a value of $22bn.
The sale will be a direct listing, an alternative to a traditional initial public offering in which bankers underwrite new shares to raise capital.
Instead, no new shares are issued and current investors, including the billionaire Peter Thiel, will be able to place their shares on the open market when trading begins. The sale has raised questions about Palantir’s valuation: this month, the research firm PitchBook valued Palantir at $8.8bn, less than half what bankers anticipate will be its opening, or reference, price.
In previous direct market listings, such as Spotify and Slack, opening prices significantly exceeded the reference prices, increasing the market value of the companies – and offered investors an immediate cash return. A typical IPO restricts existing shareholders and employees from selling shares for 180 days after a company goes public.
Like many tech companies going public, Palantir has never turned a profit. It lost $580m in 2019. The first six months of 2020 showed improvement, with a $164m loss compared with a $274m deficit in the same period last year. Earlier this week, the company said it anticipates revenue growth of 42% to about $1.1bn.
The company, which was founded in 2003 and named for the all-seeing stones in JRR Tolkien’s Lord of the Rings, has other mysterious qualities: one of its first customers was In-Q-Tel, the venture investing arm of the CIA.
Palantir has also been a target of criticism over the use of its predictive surveillance technology by the US Immigration and Customs Enforcement (Ice) agency to assist in deportations as well as by a handful of domestic and international law enforcement agencies.
Aside from the CIA, Palantir’s US client list has included the FBI, the NSA, the Centers for Disease Control and Prevention, the marine corps, the air force, Special Operations Command, West Point and the IRS. According to a 2017 Guardian report, Palantir helped convict Ponzi schemer Bernie Madoff.
Palantir’s multibillion-dollar valuation comes despite an unusual governance structure: the shares of its three co-founders, including Thiel, are structured in a way that concentrates the power of executives should they offload their stakes.
Through Palantir’s voting structure, according to securities filings, its president, Stephen Cohen, could effectively control the company by owning just 0.5% of the shares.
The company has also been criticized for making multimillion loans to executives, including Cohen, that were later paid down using company shares.
That has raised comparisons to WeWork, the work-share company whose IPO flamed out after the generous benefits and outsized company control of the co-founder and former CEO Adam Neumann came to light.
Palantir’s structure “takes it to another level with concentrating power with the founders”, Anita Dorett, the associate program director at the Interfaith Center on Corporate Responsibility, told the Wall Street Journal.
But despite these concerns, and amid a broader economy that’s struggling to finding a footing in the midst of the Covid-19 pandemic, Palantir is going public amid surging demand by investors for technology stocks.
This year is looking to be one of the busiest years for IPOs on record. New public shares are mostly soaring, rising an average of 22% on their first day of trading.
Issuers of US IPO listings have taken in $95bn listings through the end of Wednesday, exceeding the $84bn raised in September 2000, according to Dealogic, just as the dot-com bubble began to burst.