Palantir Opens At $10 A Share, Market Value Starts At $22 Billion

In early trading, the stock has traded as high as $11.41. Just minutes into trading, volume in the stock has surged to 164 million shares, making it the day’s most active stock.

Founded 17 years ago by a group of former PayPal execs, including current CEO Alex Karp and the venture investor Peter Thiel, Palantir provides sophisticated software tools to help companies, nonprofits and government agencies analyze huge data sets. (The name is a reference to magical stones in J.R.R. Tolkien’s Lord of the Rings books.)

The company attracts scrutiny for its work with U.S. intelligence agencies, but the company also works with a wide range of commercial businesses. Palantir has two primary products: Palantir Gotham, a platform to “integrate, manage, secure and analyze all of your enterprise data,” and Palantir Foundry, which the company describes as “a platform that re-imagines how people use data by removing the barriers between back-end data management and front-end data analysis.”

Peter Thiel, who made a fortune as an early investor in Facebook, is a co-founder of the company, and remains one of the company’s largest shareholders. Palantir raised $2.6 billion in venture capital, according to Crunchbase. Investors in the company include the Japanese insurance company Sompo Holdings, Fujitsu, Thiel’s Founders Fund, Morgan Stanley, BlackRock and Tiger Global, among others.

Last week, Palantir (PLTR) provided financial guidance for the third quarter ending Sept. 30, the full year, and next year.

The company projects third-quarter revenue of $278 million to $280 million, up between 46% and 47%, with non-GAAP operating income of $60 million to $62 million, excluding $54 million in expenses related to the listing, stock-based compensation, and related payroll expenses.

For the full year, the company sees revenue of $1.05 billion to $1.06 billion, up between 41% and 43%, with non-GAAP operating income of $116 million to $126 million. The company expects 2021 revenue growth of more than 30%. That suggests the stock at the opening has a valuation of about 16 times projected 2021 revenues. That’s higher than established software companies like Microsoft (MSFT) and Salesforce.com (CRM), but far below the current valuations for fast-growing companies like Snowflake (SNOW) at more than 100 times sales and Zoom Video Communications (ZM) at about 60 times.

For the fourth time now, the NYSE reference price hasn’t proved especially helpful in projecting the first trade. In the other direct listing on Wednesday, the NYSE a reference price of $21, and the stock began trading at $27. The most recent previous major direct listing was Slack Technologies (ticker: WORK) in June 2019, which had a reference price of $26, and opened for trading at $38.50. For Spotify Technology (SPOT), which listed in April 2018, the reference price was $132, and the first trade came at $167.

A reference price isn’t the same as the IPO price in a conventional offering. In an IPO, the shares to be sold in the offering are exchanged at the stated price. But zero shares are traded at the reference price in a direct listing. As one IPO market observer told Barron’s, “The reference price is totally useless and always based on the last private market trades.”

The reference price is about in line with recent private market trading in Palantir shares. Note that the majority of the company’s stock is subject to a six-month lockup agreement, a measure intended to reduce volatility in early trading.

Write to Eric J. Savitz at eric.savitz@barrons.com