On 6th November, the Peter Thiel-backed Silicon Valley start-up Palantir revealed that it has confidentially initiated paperwork with the United States Securities and Exchange Commission for public listing. The press release stated, “Palantir Technologies Inc. today announced that it has confidentially submitted a draft registration statement on
Form S-1 with the U.S. Securities and Exchange Commission (the “SEC”) relating to the proposed public listing of its Class A common stock.
The public listing is expected to take place after the SEC completes its review process, subject to market and other
Why did Palantir opt for confidential filing?
The confidential IPO was introduced in 2012, as a part of the Jumpstart Our Business Start-ups (JOBS) Act, to support small companies in their effort to go public. The confidential IPO filings allow companies to sidestep the traditional IPO filing mechanisms. Companies may desire information to remain confidential for longer as it prevents competitors from gaining insight into the companies’ operations, potential risks
and financial figures which require to be disclosed if the traditional methods are followed.
The confidential IPO also lets companies test the waters without heavy media and public scrutiny. The strategy has been employed by companies such as Uber and Spotify in the past. However, the press release did not specify whether Palantir would go the IPO route or go public through a direct listing. “The minute companies go public, they are less competitive.” Mr Alex Karp, the CEO said in 2014.
Palantir’s Government Contracts
Palantir is a provider of secretive data and analytics with major clients including the U.K and U.S. government. The company scored multi-million deals with the Health and Human Services (HHS) department and with the U.S. Coast Guard on their coronavirus response plans in June. The same month, the firm signed a contract of $6.7 million with the SEC itself. For the U.K. National Health Service, Palantir’s tools were used to help track resources such as hospital capacity and ventilator supply. The company has also been known to enter into sensitive contracts. It has been involved in more controversial work, with the Immigration Customs Enforcement in the U.S. to facilitate in profiling and removal of undocumented immigrants. Criticisms have surfaced after their aid to the deportation efforts of ICE.
Government agencies and law enforcement bodies worldwide use their software to collate data on citizens with the objective of combating crime, tracking terrorists, and in recent months, tracking the spread of Covid-19. The pandemic has expanded the opportunities for the firm as private companies use its products to help determine how
Financial Health of the Company
From being a government surveillance player to providing data analytics services to private corporations, Palantir’s public listing has been anticipated since it was founded in 2003, by a group of PayPal alumni including Peter Thiel and Alex Karp. In its 2015 funding, the firm was valued at $20 billion, making it the last publicly known valuation for the company based on funding round.
Raising $2.6 billion privately in their years of operation, Palantir has been one of the most highly valued venture-backed companies. Documents reportedly showed Palantir increased revenue 24 per cent to $739 million last year. It recently told investors this year that it expects to break even in 2020 with expected revenue of about $1 billion.
Palantir’s funders include Founders Fund, the venture capital firm started by Peter Thiel. Other large investors include Morgan Stanley, BlackRock Inc. and Tiger Global Management.
Last week, the Palo Alto company filed a Form D with the SEC, indicating plans to raise an additional $960 million. The filing revealed it had already sold $550 million of the shares it planned to sell. That consists of a $500 million investment from Sompo Japan Nipponkoa Holdings Inc. and $50 million from Fujitsu Ltd.
Changes for the Public Listing
More recently, steps were taken to prepare for a public listing by the California-based company. California requires companies to have at least one woman on their board to be able to go public. Alexandra Wolfe Schiff, a former Wall Street Journal reporter joined the board in June.
Spencer Rascoff, a founder of Seattle-based online real estate company Zillow Group Inc, and Alex Moore, Palantir’s first employee and director of operations were also additions to the Board. Alexandra Wolfe Schiff, the daughter of Tom Wolfe, the late journalist and author, joins the Board. Palantir employs “forward-deployed software engineers” who work closely with clients. The company has been under a veil of secrecy regarding its software and operations
with many of its customers under non-disclosure agreements. Despite persistent speculation about its prospects as a public company, Palantir had avoided listing its shares for over a decade. A public listing would reveal a fuller picture of their work, particularly with government agencies, for the first time.
People familiar with the matter comment that the privately held company resisted going public because it risked getting valued like a consultancy. On the other hand, investors have long given the company the liberty to create its own route toward profitability. Their announcement on Monday gave little to no information about the offering, the
amount the company looks to raise, its expected valuation and time of the offering. The secondary shares of the company in recent years indicate a valuation between $10 billion to $12 billion. Morgan Stanley is expected to play a significant role in the company’s plans to go public.
With rumours of conversion to a public company for over a decade, if the review procedure is completed, it is bound to be a significant IPO whenever it arrives. After the market froze post-COVID-19 outbreak and the stock market started booming again in June, a series of new IPO offerings by tech-driven companies have been observed.
According to Bloomberg reports, the company could begin trading on Wall Street by the end of this calendar year. With the present market scenario, Palantir could be the highest-profile market debut of the year.