Palantir Technologies (PLTR), an American software company that specializes in big data analytics. Headquartered in Denver, Colorado, starts trading on Wednesday for $9+ per share.
Palantir will not launch a traditional initial public offering, instead planning a direct listing on the New York Stock Exchange. While an IPO typically involves the sale of a block of shares via underwriters, in a direct listing, existing holders including founders, venture firms, and vested employees sell shares on the exchange.
Direct listings are a lot simpler than IPOs and involve fewer restrictions, but they can also be riskier. They are missing the underwriting banks that connect companies with big-money institutional interest, come up with a price range for the shares, and backstop the offering in the event of a lack of interest.
In recent years only two other tech companies, Spotify Technology (SPOT) and Slack Technologies (WORK), have used direct listings to go public. Spotify is up 77% since it first started trading, while Slack is down 33%.
There’s strong and increasing government demand for data analytics, and defense IT should hold up even if there are budget battles in the years to come. But potential investors should be warned that intelligence business by its nature is shrouded in secrecy, and this will likely be a company without much clarity for the foreseeable future.
Sutter Rock Capital (SSSS): A Palantir Technologies (PLTR) pre-ipo play
In our previous article, we mentioned Sutter Rock Capital (SSSS) owns about 5.77m Palantir Technologies (PLTR) shares dating back to 2012. Sutter Rock Capital gave it a fair value stock price of $5.29 in their last 10Q but Wall Street Journal posted an article last night that Palantir’s IPO will likely open trading at $10. I predict Palantir will trade around $12 to $15+ with Sutter Rock Capital trading around $17 to $23 dollars.
Should you invest in Palantir Technologies (PLTR)?
I recommend you don’t rush in to buy IPOs in most circumstances, and Palantir is no exception. The company’s had success in government circles and has great potential, but given the nature of the offering, the overall volatility of the markets, and uncertainty about valuation, I wouldn’t be surprised to see this stock have a choppy first few months but it’s definitely a long term investment.
Alternatively, you can look at investing in Sutter Rock Capital (SURO) as a pre-IPO play on Palantir.