Data-mining Firm Palantir Files for Stealth Public Offering
Comment of the Day

July 08 2020

Commentary by Eoin Treacy

Data-mining Firm Palantir Files for Stealth Public Offering

This article from The Associated Press may be of interest to subscribers. Here is a section:

The Silicon Valley data-mining firm Palantir Technologies confidentially filed to go public, setting up what could be the biggest stock offering from a technology company since Uber’s debut last year.

Founded in 2004 by investors including Peter Thiel, the company works with governments, law enforcement agencies and the defense establishment to organize and analyze huge volumes of data. The technology can be used to disrupt terrorist networks or battle human trafficking. Most recently, it was used by the White House to track coronavirus infections. Last year, Palantir won army contracts potentially worth hundreds of millions of dollars.

Palantir’s clients include major banks and the U.N.’s World Food Program.

The company has stirred controversy for upgrading Immigration and Customs Enforcement software that has been used in the Trump administration’s deportation crackdown, which led to on-campus campaigns to discourage recruitment and the picketing of CEO Alex Karp’s home.

The Palo Alto company has attracted venture capital from investors including In-Q-Tel, the Central Intelligence Agency’s investment arm. It has been weighing going public for years, with reluctance coming from the added scrutiny to the secretive nature of much of its business.

In a prepared release late Monday, Palantir said it had submitted its filing to the Security and Exchange Commission for confidential review and that a public stock listing is expected afterward “subject to market and other conditions.”

With the U.S. stock market rallying in recent weeks, a number of tech companies have gone public including Vroom, which sells used vehicles online, and Lemonade, an insurance start up.

Eoin Treacy's view

Going public is not for everyone. If a company’s margins and market niche would attract attention and competition there is a clear incentive to stay private. Therefore, when a group of companies that have long eschewed the opportunity to list decide to do so, it is often a signal of the wider market environment not least because it affords early investors an opportunity to exit the business.

Palantir Technologies in the cloud and AI space, Quicken Loans which is dominant in the mortgage origination sector and Lemonade, which is one of a group of insurance sector interlopers have all made headlines this week.

The common characteristic they share is a reliance on government support for the economy and a healthy consumer. The fact they are using the current bounce to list suggests they are effectively selling the rally. It’s a good time to do it. Financial repression is pushing sovereign wealth funds, pensions and life insurance companies into the private equity space to collect a competitive yield. With global sovereign yields close to record lows, they have no choice.

The Renaissance IPO ETF remains in a steep but consistent uptrend and a break in the sequence of higher reaction lows would be required to check momentum beyond a pause.

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