Palantir's Direct Listing IPO: What Investors Need To Know

One of the most anticipated initial public offerings of the week comes Wednesday with the direct listing of the secretive government and commercial security company Palantir Technologies.

Palantir's Direct Offering: Palantir Technologies Inc PLTR is planning on selling 244,233,967 shares via a direct listing. In direct listings, the price of shares is determined by investor demand at the time of the offering.

The Wall Street Journal estimates shares will price around $10, valuing the company at $22 billion.

Spotify Technology SPOT and Slack Technologies WORK both went public with direct listings. Both companies had strong returns upon their market debuts.

About Palantir Technologies: Palantir was founded by Alexander Karp, Stephen Cohen and Paypal PYPL co-founder Peter Thiel in 2003.

The company targets the government and commercial sectors with its respective Palantir Gotham and Palantir Foundry platforms.

Palantir had 125 customers in the first half of 2020, covering 36 industries across 150 countries.

Palantir's Market Size: Palantir lists its total addressable market as $119 billion.

The company believes the commercial market is worth $56 billion on the basis of 6,000 companies with $500 million in annual revenue.

The government segment is seen as a $63-billion market, with the U.S. portion representing $26 billion.

In 2019, Palantir's revenue split was 52% commercial and 47% government. The company saw 60% of fiscal 2019 revenue come from international customers.

Palantir's Financials: Palantir reports revenue of $742.6 million in fiscal 2019, for a year-over-year increase of 25%.

Revenue in the first half of fiscal 2020 was $481.2 million, a year-over-year increase of 49%.

The company’s top 20 customers had average annual revenue of $24.8 million in the first half of fiscal 2020 versus $21.7 million a year ago. The company’s average revenue per customer was $5.6 million for the first half of fiscal 2020 compared to $5.2 million a year ago.

Palantir reported an adjusted net loss of $337.7 million in fiscal 2019.

For the first six months of fiscal 2020, Palantir reported an adjusted profit of $17.2 million.

Palantir's Plans for Growth: One of the areas the company is growing is in the timeliness of its software installation.

Palantir said it took an average of 14 days to complete this process for new customers in the second quarter of 2019. That process now takes as little as six hours as of the second quarter of fiscal 2020.

Among Palantir’s growth plans following the offering are continuing its expansion in the commercial sector; increasing reach with existing customers; becoming the default operating system for data for the U.S. government; expanding reach with U.S. allies abroad; pursuing new methods of customer acquisition; and growing the company's direct sales force.

Watching Sutter Rock: Back in August, Benzinga highlighted Sutter Rock Capital SSSS. The company has a stake in Palantir that it has held for many years. The stake is the largest part of the company’s portfolio and valued at $30.5 million.

Sutter Rock paid $16.2 million for the stake and is basing its value on Palantir being worth $12 billion. Palantir’s pricing and valuation will be a catalyst for Sutter Rock, as it will put a true value on the company’s stake and also make the stake liquid.

Sutter Rock shares are up 98% in 2020.