Palantir makes its pitch to investors ahead of direct listing

Lizette Chapman, Bloomberg News

Palantir Technologies Inc. signage is displayed outside the company's headquarters in Palo Alto, California, U.S., on Tuesday, Nov. 5, 2019. BP Plc, one of the world's biggest oil and gas companies, is a shareholder in secretive U.S. data-mining firm Palantir Technologies Inc., the Sunday Times reported. Photographer: David Paul Morris/Bloomberg , Bloomberg

Palantir Technologies Inc. Chief Executive Officer Alex Karp told investors on Wednesday that the company is holding fast to its strategy of helping government agencies like the U.S. Defense Department digest and analyze data -- even though those associations have stirred controversy in the past.

In the run-up to a direct listing on the New York Stock Exchange slated for Sept. 23, Karp also said that if would-be investors want Palantir to change its client base or culture of U.S. government support, then they should “pick a different company.”

“We have certain beliefs and we will stick with those,” he said.

It’s unclear what valuation Palantir could fetch on the public market. Private investors last valued the company at $20 billion in 2015, but research firm PitchBook recently pegged its valuation at $8.8 billion, using revenue multiples from comparable companies.

Palantir makes money by selling data analysis and software to governments and private companies. During the investor presentation Wednesday, company executives outlined the hybrid nature of its business -- revenue is roughly equal between government and commercial customers -- and Karp delved into the thinking that drives executive and board decisions.

Palantir has faced criticism from privacy rights groups, and even its own employees, because of its work with the U.S. government. The company has helped U.S. agencies carry out controversial data collection and surveillance policies, and it has recently doubled down on its pursuit of government work. In its filing to go public, the company said that it “has chosen sides.”

Palantir suggested that an unusual voting structure would help solidify a commitment to democracies, but the structure has also raised eyebrows from investors. Palantir’s chairman and major shareholder, Peter Thiel, along with two of the company’s other co-founders, Stephen Cohen and Karp, will control 49.99% of voting shares “for the foreseeable future,” according to the filing.

Palantir isn’t the first company to concentrate power into the hands of a few executives -- Facebook Inc. is one of the first and most discussed -- the structure sparked a reproach from the Council of Institutional Investors and a call for Palantir to shift to a one-share, one-vote model within seven years. The company did not address the issue during Wednesday’s presentation.

So far this year, more than 95% of Palantir’s revenue came from existing customers, it said its Wednesday presentation. A large part of revenue has come from a relatively small number of customers -- the top three together accounted for 28% of its revenue last year, the company said in the filing. The average revenue per customer was $5.6 million.Palantir grew sales 49% during the first half of 2020 to $481 million, suggesting an annual revenue run rate of $962 million this year. It grew revenue 25% to $743 million in 2019, but still lost $580 million and has yet to turn an annual profit since it was founded in 2003.