Palantir IPO in 2017?
It’s looking more and more like 2017 is going to be the year of the tech initial public offering (IPO). With Snap Inc. likely to go public in March, and rumors surrounding the tech giant Uber Technologies, Inc. being ready to open its $40.0-billion valuation to the public—and other tech companies possibly having IPOs in 2017—there’s no shortage of potential game-changing new tech stocks hitting the market this year.
But there’s one company that investors shouldn’t forget about in all this excitement: Palantir Technologies. A Palantir IPO is set to be one of the strongest—and most likely—big tech IPOs of 2017. Couple that with the support of tech luminary (and recent magnet for controversy) chairperson Peter Thiel, and you have good cause for huge buzz surrounding the company.
While there’s been no concrete confirmation that Palantir stock will be available to the public in 2017, there are many signs pointing toward a potential Palantir IPO.
First, there was a liquidity event in which Palantir agreed to buy up to $225.0 million in common stock from its employees. The company reportedly offered $7.40 per share, a premium compared to the roughly $7.00 that outside buyers had been paying at the time on the secondary market. Bankers had, in March 2016, devalued the shares further to just below $6.00, which makes that $7.40 a pretty sweet deal for employees, at least in the short term. (Source: “Why a Palantir IPO might not be far off,” TechCrunch, June 24, 2016.)
While there are a couple of different explanations for the stock buyback, one very plausible reason could be the preparation of an IPO.
Another move in support of the idea of a 2017 Palantir IPO is the recent openings in the company’s finance department, including an internal auditor, another potential signal that Peter Thiel is readying up for an IPO move sooner rather than later.
Palantir Stock to Go Public?
So what are the chances of us seeing Palantir stock available to the public in the near future? Well, that depends on what information you choose to place emphasis on.
With a Palantir IPO valuation of $20.0 billion, you have strong support from restive investors looking to scratch that tech IPO itch. While the price per share is unknowable at this time, there’s reason to believe that many would see the stock as a winner the second it hits the market. And that’s because, unlike many of its tech competitors, the company is already close to profitability.
Palantir specializes in big data analysis and has divided its offerings into two main subdivisions: “Palantir Gotham” and “Palantir Metropolis.” Palantir Gotham largely caters to government agencies while Palantir Metropolis is more focused on the financial and insurance sectors.
Palantir CEO and co-founder Alex Karp spoke at a 2016 The Wall Street Journal technology conference, where he said that the government side of the business is already profitable, with the business-facing arm of the company expected to enter the black in 2017. (Source: “Will Palantir Launch an IPO?” The Wall Street Journal, October 26, 2016.)
The profitability base, along with the superb valuation, will only intensify calls for a Palantir IPO. But there is a counter-narrative to the IPO date falling in 2017.
“Philosophically, I have always been opposed to going public,” said Karp at the conference. “First of all, I have noticed, very empirically . . . I have never seen a company that is public compete effectively against us (for engineers).” Sentiments like these will naturally temper some of the fervor building in anticipation over a 2017 Palantir IPO.
Nevertheless, Karp did contradict himself slightly by claiming that Google is the best at recruiting. Google is, of course, a subsidiary of Alphabet Inc (NASDAQ:GOOG), a publicly traded company.
Digression aside, Karp said that the recruiting troubles mixed with cultural corrosion gave him “great trepidation about going public.”
He also mentioned that the plan for Palantir was to defer profitability for as long as possible in favor of growth but, with the two major wings of the company making money faster than expected, an IPO may be inevitable.
Karp did offer that Palantir could continue to forgo profitability by expanding into new markets or taking on another ambitious project of that nature, but that it would have to be done rapidly in order to offset the current financial trajectory.
A final obstacle that Karp staked out concerning a Palantir public offering had to do, again, with his employees. He said:
Then you have the very simple problem . . . the people who create the value of production, the workers at Palantir, they need to know that they have liquidity at a fair price. Of course I want my investors to be happy, but the primary people I care about are the wide-eyed people at Palantir who are working day and night.
Palantir IPO Date
So when would be the Palantir IPO date exactly? The short answer: to be determined.
As with the Palantir price per share (which will only be made public the night before Palantir stock becomes available to the public), the IPO date is by no means established.
There are also a number of other events that investors eyeing a Palantir stock price coming in this should be aware of.
An investigation by BuzzFeed revealed that the big data analytics provided by the company didn’t suit every client, claiming that Palantir had lost large corporate customers like The Coca-Cola Co (NYSE:KO). (Source: “Palantir considers IPO and predicts profit in 2017,” Financial Times, October 26, 2016.)
Karp, elaborating on the issue at The Wall Street Journal tech conference, said that “just because a company is great, doesn’t mean they are a great fit.” He went on to say that by focusing only on clients that can deliver $100.0 million or more in sales, Palantir had achieved tenfold growth.
The company has 20 contracts worth more than $100.0 million, including one with the U.S. Navy Seals worth about $400.0 million over its lifetime, said Karp. Furthermore, Karp told the conference-goers that Palantir’s revenue generated outside the U.S. doubled in 2015 and 2016.
The Peter Thiel-Donald Trump Effect
While not directly related to a IPO in 2017, it is important to note that Peter Thiel’s growing national profile—especially in relation to President Donald Trump, to whom he provides advice to as a member of Trump’s transition team—may have some unforeseen effects on the Palantir IPO.
While it is difficult to say exactly how the Thiel-Trump saga will ultimately affect the Palantir IPO— if there is one at all—it is important to note that Thiel is by no means some faceless billionaire tech guru. While having always maintained a relatively high profile to begin with, his new prominence was accelerated by his outspoken support of Trump during the election, as well as continued work with the Trump administration now that it has assumed power.
All this is while most tech billionaires have vehemently opposed Trump in many regards. Nearly 100 companies, including tech behemoths like Alphabet and Apple Inc. (NASDAQ:AAPL), banded together in a legal brief opposing Trump’s temporary travel ban, arguing that it would incentivize companies to export jobs abroad. (Source: “U.S. tech leads nearly 100 companies in legal brief against Trump travel ban,” Reuters, February 6, 2017.)
With politics becoming ever more embroiled with economics in the United States. as of late, it’s not unrealistic to imagine the Thiel-Trump connection having an effect on Palantir.
The Future of Big Data
Big data is taking over. Even sports are making use of analytics more and more, as depicted in the film Moneyball.
Some analysts forecast that big data analytics will see worldwide revenue growth of over 50% in a five-year period, from nearly $122.0 billion in 2015 to more than $187.0 billion in 2019, according to the International Data Corporation (otherwise known as IDC). (Source: “Roundup Of Analytics, Big Data & BI Forecasts And Market Estimates, 2016,” Forbes, August 20, 2016.)
Which means there’s a lot of excitement brewing in the industry. Palantir is by no means the only fish in the big data analytics sea, but it is one of the larger catches.
There are a ton of reasons to be excited about a 2017 Palantir IPO beyond those mentioned above. Of course, the question is whether the stock will actually be released to the public this year.
Not to mention, there are also a few factors working against the company’s public offering, from the IPO-averse CEO Alex Karp to the headline-grabbing chairperson Peter Theil. But none of these factors are substantial enough to truly damage Palantir.
Outside events could also play a role in the company going public. A highly successful Snapchat IPO, for instance, could signal that the market is ready (some would say starved) for more big tech names to become available to common investors. A roaring Snapchat success or any other big-name tech IPO in 2017 could entice Palantir to take the plunge. By contrast, a failed or disappointing Snap IPO could create further skittish sentiments among the leadership at Palantir.
In the end, we’ll have to wait to see which direction the company is steered in during 2017 to see whether an IPO is in the cards. For now, the company has made no firm indications one way or the other as to how the year will play out.
The key for anyone interested in a Palantir stock IPO is to, for the moment anyways, watch, wait, and be prepared.