Hi all. So recently news broke that Palantir will be going public. I know that information on valuation and stuff is sparse, and as an investor and follower of Palantir fora few years now, I wanted to share my knowledge (read: spamming "palantir IPO" into google news every day for the past 2 years) and project what sort of valuation/price it will get at IPO.
To start off- yes my family owns Palantir shares. Just a disclaimer.
What is Palantir?: Palantir is a data mining/surveillance company founded 17 years ago by Peter Thiel and with funding from the CIA as an early investor. They basically develop products and services that help governments and companies track people and data. They are rumored to be behind many of the clandestine operations of the world, such as the tracking down of Osama-Bin-Laden. They have also been in the news lately for getting several large contracts from the Army, Navy, and to help track Covid for the NHS in the UK and the US.
Palantir's financial numbers?: Palantir's numbers have been in the air for a while now since as a private company they are not required to disclose their financial numbers publicly. As of now, from what Bloomberg and Reuters have reported: They had $739 Million in revenues in 2019, projecting a 35% growth rate to $1 Billion in revenues in 2020, and $1.5 Billion in 2021 for a 50% growth rate. They are break even as of this year.
Valuation?: This is the tricky part about Palantir. They got funding in 2015 at $11.38 a share, valuing them at $20 Billion. However, reportedly, they were cocky back then and did not hire sales staff, and had engineers dressed in khakis show up to governmental contract pitches. That, as you would expect, did not go well and caused them to suffer. They recently cleaned up their act, hired sales staff, and have been growing rapidly, aided by COVID which has significantly boosted demand for their services/products. Shares were available on the Pre-IPO market at $4.5-$5.15 a share before the IPO announcement, with implied valuations of around $9-11 Billion. Considering their revenue and growth numbers, a good comp I like to make is to Splunk, who operate in a very similar field to Palantir. In March 2018, Splunk had annual revenues of $1.21 Billion with projections for $1.65 Billion in revenues for 2019. That is EXTREMELY similar to Palantir's current projections for $1 B in revenues this year and $1.5 B in revenues next year. Splunk had a market cap of $16.5 Billion when it reported these numbers, and I expect the Palantir IPO to slot in at around $15-$20 Billion because of this past data. I do not know how to account for IPO hysteria, but with a name such as Palantir who have so much hype surrounding them, an IPO pop could see shares rise higher as well. It is important to note however, that 3 days before IPO plans came out, Palantir cut employee stock option prices to $4.72 a share from around $6 a share. This may be due to a investment bank telling them their shares are worth around $5 a share, as they are trading on the Pre-IPO market.
If I was a separate investor not already invested in Palantir: Palantir is a solid company with governmental contracts, which are hard to dislodge. I think $15-$20 Billion is a fair valuation and a good investment if that is the price they indeed IPO at. If it pops higher, I would stay away from the IPO as there are still some risks surrounding the company regarding brand image and scalability (how much of their revenues is high margin product vs low margin consultancy?)
Feel free to leave any questions or comments! Looking forward to a discussion/thoughts.
Submitted June 13, 2020 at 07:30PM by proabhinav7 https://ift.tt/2MUNTmH
