Shares in Palantir closed below their debut price on Wednesday, dragging the data analysis company’s market value $4bn under the high water mark it reached five years ago.
Palantir stock initially surged more than 10 per cent above its $10 opening price but ended the day at $9.73, giving it a market value of $15.8bn. The valuation is short of the $20bn it reached in private hands in 2015, a gap partly explained by investors’ uncertainty about its attempted shift from a consultancy to a full software company.
The flotation was one of two direct listings on the New York Stock Exchange on Wednesday. Asana, the business software company led by Facebook co-founder Dustin Moskovitz, opened at $27 and ended the day at $29.96, valuing it at more than $4.6bn.
Asana sells task-management software used by organisations including Google and Nasa. At its most recent equity fundraising in November 2018, the company was valued at $1.5bn.
The duo enter a hot market for tech listings, following cloud computing company Snowflake’s $3.4bn initial public offering earlier in September. That marked the largest IPO of the year and the biggest on record for a US software group.
At the end of day, Palantir was valued well below other recently listed software companies, at 15 times this year’s expected revenue, despite a projected growth rate of more than 40 per cent. However, Brendan Burke, tech analyst at PitchBook, said even this looked high, and that it was “speculative” to assume Palantir would achieve the predictable growth typical in the software industry.
Shyam Sankar, chief operating officer, said Palantir had originally planned to go public late next year, giving it more time to demonstrate that its attempted shift to a pure software business model was bearing fruit. But he said the pandemic had brought a flood of new business and accelerated the company’s plans.
The twin debuts were also a test for direct listings, a process that has emerged as an alternative to the traditional IPO. Unlike in an IPO, the companies had to match demand from public investors with supply from existing private shareholders to execute their first trades.
Palantir and Asana used Morgan Stanley as lead adviser and Citadel Securities as the market maker overseeing the trading for both listings.
“Both companies are fast growing and highly unprofitable,” said Bill Smith, chief executive of Renaissance Capital, a fund manager of IPO exchange traded funds. “Asana has achieved a sticky customer base and strong net retention, and Palantir has long contracts with its customers.”
On Tuesday, the New York Stock Exchange released a reference price of $7.25 for Palantir, implying the company would have a market capitalisation of about $11.7bn. The exchange put Asana’s reference price at $21.
Reference prices, based on private trades, act as a guide to the market but are not the same as an IPO price, which is the amount investors pay for shares in a typical flotation. Both Slack and Spotify, which went public through direct listings, traded above their reference prices upon listing.
Palantir stands apart from the Silicon Valley tech establishment for brandishing its close ties to the national security community.
The company is led by Alex Karp and co-founded by Peter Thiel, the venture capitalist whose support for President Donald Trump has placed him at odds with his more left-leaning peers. Along with another co-founder, Stephen Cohen, they will retain control of the company through a complex voting structure that has raised concerns among corporate governance watchdogs.
Unlike in similar direct listings, Palantir will keep the majority of its stock locked up for months after it goes public, allowing only a portion of its class A common stock to trade on the first day.
The direct listings join 11 IPOs this week, making it one of the year’s busiest. The run of flotations has tracked the booming stock market rally against the backdrop of the Covid-19 pandemic.
Proceeds raised in IPOs for the year have already eclipsed every year since 2014, when Alibaba set a record for the largest US listing, according to Refinitiv data.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50LzJjMmQ4MTlmLTYxMDYtNDQwMy05NjRkLTM4Yjc4YzVmZDI0MNIBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50LzJjMmQ4MTlmLTYxMDYtNDQwMy05NjRkLTM4Yjc4YzVmZDI0MA?oc=5
2020-09-30 18:40:00Z
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