Last week, big data analytics firm Palantir Technologies announced it confidentially filed paperwork with the U.S. Securities and Exchange Commission (SEC) to go public.
Confidential IPO filings allow companies to bypass traditional filing mechanisms. That’s so Palantir doesn’t have to give insights into their inner workings such a financial figures and potential risks.
This strategy has recently been used by other tech giants who went public recently, including Spotify, Slack, and Uber.
It’s unsure exactly when Palantir will go public, but it’s expected to take place after the SEC completes its review process, subject to market and other conditions. My guess is that this happens in the next couple months.
But I believe Palantir is going public now for a couple reasons:
First, the markets have been very receptive of new tech IPOs in recent months. Just look at what happened with Lemonade Inc. (NYSE: LMND). The stock jumped 139% on its first day of trading earlier this month. That indicates demand is high for new tech IPOs.
Will Palantir be able to do something similar? It’s very possible.
Second, the markets will likely continue to be propped up by the Federal Reserve heading into the 2020 Presidential election.
The Fed has already pumped $3.5 trillion into the economy since 45 million Americans have already filed for unemployment because of the pandemic. And since it’s unlikely we get a vaccine that can be widely distributed before November, more stimulus will be required just to help people get by.
This stimulus will boost all stocks, including Palantir if it’s able to IPO soon. In the meantime, here’s everything you need to know to make an informed decision about the company before it goes public…
What We Know About Palantir So Far (and Whether to Buy the IPO)
Two things I look for when determining whether to buy a new stock are: strong leadership/management and competitive advantages in a big market that can’t easily be replicated by another company.
Benjamin Graham/Warren Buffett-style value investors call this having a “wide moat.”
And Palantir Technologies checks both of these boxes…
Founded by billionaire investor and entrepreneur Peter Thiel in 2003, Palantir’s mission is to help people and institutions solve hard problems and change the world for the better with good data and the right technology.
Palantir collects big data from public and private databases and uses artificial intelligence to analyze the information it gathers. The proprietary AI technology the company engineered itself gives it a wide moat over its competitors.
When it comes to allocating capital and signing massive profit-driving clients for Palantir, I have no question that Peter Theil is the best man in the world for the job.
In 1998, Theil co-founded PayPal with LinkedIn’s Reid Hoffman, Tesla’s Elon Musk, YouTube’s Jawed Karim, and more.
So, he knows a thing or two about running a tech company and how to surround himself with the best and brightest engineers possible.
Thiel’s also one of the most successful venture capitalists of all time. He made the first outside investment in Facebook (NASDAQ: FB), where he still serves as a director. And he provided early funding for LinkedIn, Yelp, SpaceX, and Airbnb – just to name a few.
The relationships Theil has with the leaders in tech, general business, and the government have led to Palantir signing many high-profile clients…
Some of Palantir’s largest customers include Morgan Stanley, Merck, Airbus, Fiat Chrysler, state and local governments, and even some federal agencies like the Department of Defense (DOD), the Central Intelligence Agency (CIA), and the National Security Agency (NSA).
Palantir was even hired by the Centers for Disease Control (CDC) for the coronavirus pandemic we’re currently facing…
In 2014, Forbes estimated Palantir’s value at $9 billion, making it one of Silicon Valley’s most valuable private tech companies.
Just five years later, in 2019, the firm was reported to be considering an IPO by the Wall Street Journal at a $41 billion valuation.
That’s a 355% return (or 39.5% annualized) over the five-year time frame.
Since the company expects 2020 revenue to be up 35% this year (after seeing a 24% increase in 2019), I think you could reasonably see Palantir stock jump 50-100% within 6-12 months of its IPO date later this year.
