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Palantir’s IPO Plans are Just as Secretive as the Company Itself

From Zacks June 2019

Palantir Technologies is a privately-held software and services company that has taken Silicon Valley by storm since its launch back in 2004. It was founded by Peter Thiel, Nathan Gettings, Joe Lonsdale, Stephen Cohen, and Alex Karp (now CEO) with the idea of “creating the world’s best user experience for working with data, one that empowers people to ask and answer complex questions without requiring them to master querying languages, statistical modeling, or the command line.”

While its name is derived from the palantÍr, a “seeing stone” in J.R.R. Tolkein’s fantasy series Lord of the Rings—even its motto is “Save the Shire,” in reference to the home of the hobbits of Middle Earth—Palantir actually emerged from mobile payments giant PayPal’s (PYPL - Free Report) anti-fraud efforts (its co-founder Thiel also co-founded PayPal).

It’s also often considered to be one of the most secretive tech unicorns out there today. And by secretive, I mean a couple of things. For one, many people just haven’t heard of the company, especially outside of the tech and investing worlds. Its Big Data focus is not nearly as flashy and exciting as Uber’s (UBER - Free Report) ride-hailing emphasis or Airbnb’s home-sharing concentration. For another, Palantir and its technology is still best known for antiterrorism and spycraft, two avenues that must be secretive in order to thrive. It’s “Minority Report come true,” writes The Guardian.

What They Do

If you have heard of Palantir, then you know that the company’s technology has been used in several notable cases, including the discovery of the infamous Chinese espionage networks, GhostNet and the Shadow Network. There’s also their rumored-but-never-confirmed efforts to help take down Osama Bin Laden.

Even though its role in Bin Laden’s takedown will likely never be established as fact, what can be recognized, however, is Palantir’s extensive relationship with the U.S. government. Palantir used to sell exclusively to the government sector; the FBI, CIA, IRS, CDC, Department of Homeland Security, Department of Defense, and several branches of the armed forces have all been customers, and up to 50% of the company’s business is tied to the public sector. Even In-Q-Tel, the CIA’s venture arm, was an early investor.

For instance, The Guardian goes on to note that the Pentagon “used Palantir software [in Iraq] to track patterns in roadside bomb deployment and worked out garage-door openers were being used as remote detonators by predicting it.”

Palantir also has commercial customers that rely on them to detect fraud, study consumer behavior, and search for a competitive edge against rivals; these clients include JPMorgan (JPM - Free Report) , Hershey (HSY - Free Report) , and Bridgewater Associates, a global investment management firm, among others. Overall, private customers made up about 75% of Palantir’s revenue as of 2016, notes Fortune.

Big Data Pioneer

As a whole, Palantir prides itself on being one of the world’s Big Data solutions experts. It’s a term that refers to a collection of structured and multi-structured data from traditional and digital sources inside and outside a company, representing a source for ongoing discovery and analysis. Examples of structured data include tweets (TWTR - Free Report) and other social media posts, while multi-structured data is something that can be derived from interactions between people and machines.

To help tackle Big Data, Palantir created two software suites for which it’s best known for.

Formerly known as Palantir Finance, Palantir Metropolis is software for data integration, information management, and quantitative analytics. The software connects to commercial, proprietary, and public data sets and discovery trends, relationships and anomalies, including predictive analytics. And yes, this software suite is named after the home city of Superman.

For users like hedge funds, banks, and financial services firms, Metropolis provides a number of integrated applications in order to build up interactive models using all the data that is available in their system. This includes Custom Metric, Dashboard, Date Set, Explorer, Regression, and Spreadsheet applications.

The other is Palantir Gotham, formerly known as Palantir Government. This software integrates structured and unstructured data, provides search and discovery capabilities, knowledge management, and secure collaboration. Like Metropolis, Gotham is named after the home city of fellow superhero Batman.

Gotham provides a suite of tools that are optimized for semantic, temporal, geospatial, and full-text analysis. Users can seamlessly drag and drop data objects from one application to the next, and applications include Graphs, Maps, Object Explorer, Browser, and Mobile.

IPO Buzz

Investors have been excited for a while now about the potential for a Palantir market debut, even though the company has yet to lay out any specific plans for an initial public offering. And unfortunately, it looks like Wall Street will have to wait just a bit longer despite rumors swelling earlier this year about a 2019 IPO.

Bloomberg reported last month that Palantir’s IPO will most likely be pushed into 2020, citing anonymous sources, due to a few things: their board of directors still only as one independent member; it doesn’t have a promising sales team in place yet, and the company still needs to find finance employees that can handle an IPO.

Palantir, though, is still one of the world’s most valuable venture-backed tech startups, having amassed over $2 billion in funding over the years. But its valuation has fluctuated. Private investors valued Palantir at $20 billion back in 2015, but that number dropped to $11 billion last year after the company had to re-price employee stock options. Then you have the mutual funds who hold Palantir shares valuing the company in a range from $4.4 billion to $14 billion, while investment banks Morgan Stanley and Credit Suisse pegged its valuation at upwards of $41 billion.

Despite its impressive valuation, Palantir is still not profitable, though Bloomberg’s sources said the company’s annual revenue grew by about 40% to $1 billion last year; they were also able to reduce losses to roughly $30 million.

2019 has been a busy, red-hot year for high-profile IPOs, thanks, in part, to the fear that an economic slowdown is approaching, and this year has been viewed as more or less a window to “get in” before that happens. Already this year, we’ve seen Uber, fellow ride-sharer Lyft (LYFT - Free Report) , Pinterest (PINS - Free Report) , Zoom (ZM - Free Report) , Beyond Meat (BYND - Free Report) , Chewy (CHWY - Free Report) , and Revolve (RVLV - Free Report) , with a direct listing from cloud-based collaboration platform Slack on the way.

For now, talks of a Palantir IPO will remain a combination of speculation and anticipation. But with its Big Data-focused business—something that will only become more prevalent with the rise of artificial intelligence—unique user base, and fundamentally secretive operations, Palantir’s potential IPO could be one for the books.

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