Did Palantir's Market Debut Live Up to the Hype?

Palantir Technologies Inc. (NYSE: PLTR) entered the market on Wednesday in one of the most anticipated market debuts this year. Note that this isn’t a traditional initial public offering (IPO) like many other companies go through to come public; instead, this is a direct listing.

The company floated shares from existing holders and let the market determine the price per share for this direct listing. Palantir set a reference price of $7.25 per share but ultimately shares came public closer to $10 apiece.

The $7.25 reference price implies a private market valuation of roughly $16 billion which is down from its valuation of $20 billion in years past. However, the opening price of $10 implies a valuation closer to $22 million. Apparently, the markets have a way of working things out.

Palantir was founded in 2003 and its focus was on the intelligence community to assist in counterterrorism investigations and operations before it began selling to commercial enterprises. The company builds software platforms for large mission-critical institutions that must remain functional even in times of crisis and uncertainty. In the first half of 2020, Palantir’s platforms were used by just 125 customers that include some of the largest and most significant institutions in the world.

This has been a very secretive company. Palantir’s 2018 revenues of $595.4 million grew to $742.5 million in 2019. And revenues of $$322.6 million in the first half of 2019 rose to $481.2 million in the first half of 2020. The net loss of -$579.6 million in 2018 was almost unchanged from the -$580 million in 2018, but the -$161.2 million in the first half of 2019 was narrower than the -$280.5 million in the first half of 2019.

In 2019, the average revenue per customer was $5.6 million and the average revenue from each of its top 20 customers was $24.8 million. Palantir’s filing included an estimate that the total addressable market for its software across the commercial and government sectors around the world is approximately $119 billion.

Palantir stock is currently trading up 27% (compared to the reference price) at $9.19, with a range of $9.11 to $11.41 on the day thus far. Also as of 3:30 p.m. ET, about 300 million shares have moved on the day.