Palantir might be one of the most talked-about companies in tech, but upon its listing Wednesday, investors didn't seem too interested. Though its stock opened at $10 per share, it spent the day slipping, closing down more than 5% at $9.50.
"I'm trying to realize how much of a luxury it really was [being private], of not looking at the stock price on a daily basis," COO Shyam Sankar told Protocol after he was informed of the slip, adding that he would be "maniacally and monastically [focused] on creating long-term value."
The listing was beset by other issues, too. Insiders, who were already hampered from selling all their shares in the direct listing thanks to an unusual lockup period, struggled to sell any at all, CNBC reported, thanks to a glitch in Morgan Stanley's share-sale system. Given the stock slip, that could have cost them a fair amount of money.
The debut marked the end of a somewhat turbulent listing process. Palantir chose to go public via a direct listing instead of an IPO, making it one of four high-profile companies to ever do so. (The others are Spotify, Slack and Asana, which also listed today.) And it had a lot of work to do in explaining to investors exactly what it does. "We are kind of an unusual company," Sankar said, explaining the company's long sales cycles, "and investors were kind enough to spend a lot of time understanding the business."
Palantir got its start building Gotham, a data dashboard for defense and intelligence agencies, but it now has bigger aims. Its Foundry product does something similar but for the private sector, creating what the company calls "a central operating system for [companies'] data." BP, Ferrari and Airbus are clients.
Critics have said the company is more like a services business than a software one, partially because of the heavy customization to its platform it reportedly does for clients. "That was one of the reasons that we had investors come see demos, to see this quote unquote extensive customization work," Sankar said. Recent R&D investments, he argued, have made it much easier for customers to tailor the platform to their needs, without Palantir's help. "A lot of those investments really hit in the back half of 2019," he said, adding "much more product leverage." Its financials suggest that might be true: Palantir's revenue is trending in the right direction, with a $165 million net loss in the first half of 2020, compared to $280 million for the same period a year earlier.
But financials may not be Palantir's biggest problem. Given its work with the military, ESG-minded investors may give the company a wide berth. "It's intrinsic to who we are," Sankar said. "Whether we will qualify for ESG or not, that's kind of a non-goal. I think investors should decide whether they think we're an interesting business or not."
Palantir's choice of customers could also disrupt it from winning new business, too. The company says it won't work with customers whose positions are "inconsistent with our mission to support Western liberal democracy," noting specifically that it will not work with the Chinese government. That could work to Palantir's benefit — the U.S. government might be more inclined to work with it than with a competitor that has Chinese dealings — but it also limits the potential revenue opportunity.
Others may take issue with its work with ICE, where its technology is used to help organize raids — something activists have targeted the company for. When asked if the ICE work could prevent other organizations from wanting to work with Palantir, Shankar said "it's quite possible," adding that the company works "on difficult problems, and we're going to embrace the complexity and the nuance of these problems." After all, he pointed out, "we started building software to help America and her allies kill and capture terrorists — that's really complex and nuanced." Palantir's work "gives us great joy, the things that we're enabling in the world, whether it's capturing human traffickers or cyber criminals," he said. "Customers will have to decide … for themselves."
For now, Palantir's big mission is to move. The company is relocating its headquarters from Palo Alto to Denver, which was "largely a cultural decision," Shankar said. "Counterfactually, you couldn't have started a business like this anywhere but Palo Alto; but also without our founders, you couldn't have started this business in Palo Alto, either. It was kind of a special set of circumstances, but I think for the next phase of our journey, Denver's the right home."
Correction: This article was updated at 3:15 p.m. PT to fix Palantir's opening and closing prices.
