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Jim Cramer on Palantir going public with direct listing

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Published on Aug 26, 2020
Data analytics company Palantir Technologies has released its prospectus to debut on public markets. Rather than sell shares through an initial public offering, the company plans a direct listing. According to the filing, Palantir lost $588 million last year. CNBC's Jim Cramer and David Faber discuss. Subscribe to CNBC PRO for access to investor and analyst insights:

Data analytics company Palantir Technologies has released its prospectus to debut on public markets. The company aims to trade on the New York Stock Exchange under the symbol PLTR. Rather than sell shares through an initial public offering, the company intends to debut with a direct listing, the same unconventional route taken by Slack in 2019 and Spotify in 2018.

Given its long history and its size — last September Reuters said the company was targeting a valuation of $26 billion or more — Palantir had been in a position to go public for years, and investors have long waited to buy shares, as they did for Pinterest, Snap and Uber. Home-renting company Airbnb could be next.

Palantir lost $588 million, or $580 million on a pro-forma basis, in 2019, according to the filing. Revenue grew almost 25% from the year earlier while the loss stayed about the same. In the first half of 2020, it lost $165 million, or $175 million on a pro-forma basis.

Named after a magical orb in “The Lord of the Rings” that lets you see across vast distances, Palantir was co-founded in 2003 by Peter Thiel. Thiel became wealthy as a founder of PayPal and an early investor in Facebook, and was a vocal supporter of President Trump’s 2016 election campaign — a rarity among tech luminaries.

Palantir has two classes of stock, Class A and Class B, and while each share of Class A stock receives the rights to one vote, each Class B share gets 10 votes. This structure is similar to Facebook. Thiel is the largest holder of Class B shares, owning about 30% of them. Palantir plans to introduce Class F shares as well, and those will have a variable number of votes. The Class F shares are meant to give founders Thiel, Stephen Cohen and CEO Alex Karp just below 50% of total voting power for the stock, essentially giving the founders control over major decisions. This echoes steps taken by other tech giants through the years, including Snap, which sold non-voting shares to investors, as well as Facebook and Google (now called Alphabet), which have introduced multiple classes of shares to maintain founder control.

Karp sought to distance Palantir from the Silicon Valley technology universe in a letter included in the filing, saying that the company’s projects are meant to keep people safe, rather than sell advertising.

With Palantir’s software, clients can clean up a wide variety of data and then display it in various styles to enable many people to explore and take action on it. Recent enhancements enable users to create text documents, analyze data in spreadsheets and view information on maps. The software can run on Amazon or Microsoft’s cloud infrastructure or in customers’ on-premises data centers, and Palantir also offers professional services to help customers use its tools.

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