Palantir is a rather unique company. They make data analytics software, which is a fancy way of saying "military grade AI." To debunk some misconceptions, this software doesn't actually collect data, it sorts it and identifies trends and anomalies.
To describe it, going back to the events leading up to 9/11 there was an FBI investigation into suspected al-Qaeda members, a radio intercept where AQ planners talked about hijacking a plane that was sitting on a desk at Langley waiting to be translated, and something else hinting at an attack very soon. These clues would not be pieced together because no one person knew all these investigations existed (Washington's bureaucracy is just that massive), and they each individually were big enough to warrant panic.
Afterwards, the Department of Homeland Security was created to help collate and horizontally integrate all that massive amount of data. BUT, if Palantir "Gotham" had been invented a decade sooner, it would have pieced it together automatically.
Gotham first started with the Defense Intelligence Agency (DIA) and the US Army, and soon branched into other segments of US military, intelligence, law enforcement agencies, as well as allied countries. Since they often have to custom craft and install different versions based on the agency's requirements, they have had a number of R&D massive contracts. This software doesn't allow agencies to do anything they didn't already, it just saves millions of manhours because the idea of sorting through all literally tens of millions of reports by hand is mind boggling. Ergo, Palantir likes to boast they helped find Bin Laden.
They also created a civilian version "Foundry." Airlines were an early buyer, as millions of dollars are wasted each year by overbookings, underbookings, and technical delays. Foundry allows them to plan and ahead.
So, they certainly have something of value to sell, but this is where things get weird.
Palantir is an apolitical company. That may sound like a no brainer, but consider they have worked for ICE and Customs as well as the DoD and CIA. The CEO Alex Karp identifies as a Progressive anyway. His philosophy is tech companies are rather unregulated and like to make their own rules. But Palantir lets elected officials in Washington make the rules. Considering their work, what else can they do?
More weirdness ensues as Palantir will not be a democracy of shares like many corporations are. Their founders have special shares that retain 49.99999 of voting power as long as they're with the company, and common shares have less than 5% of the votes. It seems they are afraid of internal shenanigans over politics, but everyday investors and traders won't care about voting power, anyway.
Palantir's business model is such there's no firm estimate on the company's real value. They work on a handful of massive contracts at a time, and several of these account for over 5% of a given year's earnings. There's no shortage of future project, though.
Next is their earnings, as they rarely show a profit as earnings and expenses expand side by side. This turns a lot of investors off, but recall most of these expenses are R&D connected. These huge one time payouts in creating/improving software allow for long term profits. See the loop? Exponential growth potential.
Next is this is a direct listing. Meaning they're not hiring an investment bank, but doing everything themselves. The CEO seems well experienced in selling his company himself, but investment specialize in raising a lot of capital really quickly. This cuts expenses, but much of the shares sold will be directly from insiders instead of being created via share dilution. So if they're not looking to make lots of money from an IPO, why do it?
- Employee compensation. Palantir has a lot of insiders that were paid bonuses in the form of shares of the company. These employees can only cash in on that when they leave the company, or when the company goes public.
- Liquidity. The ability to dilute or buy back shares at will allows them to raise capital whenever and however they want. And given they have the continual prospect of undetermined earnings and expenses and a serious amount of debt, this is very valuable to Palantir.
So I recommend buying because of the saying "You want to miss out of the next Microsoft or Amazon?" Most people say that when they are recommending a stock that already mooned and is unlikely to do so again. But I use it to point out a company that has grown very quickly over the last 17 years and shows signs of exponential earnings growth. When the money they're making will catch up to their expenses is an open question, but by the time it does that'll be the sign they've already rose almost as high as they will go.
Here's Why Palantir Stock Is a Buy After the IPO
Palantir discloses diluted share count, suggesting valuation north of $20 billion at high end
Submitted September 28, 2020 at 10:19PM by FinallySomeMurrder https://ift.tt/3mUvcAx
