This Week's Interesting IPOs

New York Stock Exchange vice-chairman and chief commercial officer John Tuttle evaluates that companies have more options to go public now than ever before. On Wednesday, data mining company Asana Inc ASAN and work management software firm Palantir Technologies Inc PLTR were both set to go public via direct listings. The last two notable companies to go public via a direct listing over the last couple of years are Slack Technologies Inc WORK and Spotify Technology SPOT.

Software companies with ties to Facebook, Inc. FB both began public trading well above prices based on their trades in private markets, finishing up more than 30% above their reference prices. Asana is a collaboration-software company co-founded by Facebook co-founder Dustin Moskovitz, who serves as chief executive.

Palantir is a data-software company co-founded by early Facebook investor and board member Peter Thiel, a German-American billionaire entrepreneur and venture capitalist who co-founded PayPal Holdings Inc PYPL.

Palantir Backdrop

Palantir launched its first software platform in 2008. It was already known as a secretive software start-up focused on military and law-enforcement issues which were already under the radar due to its controversial work with the Immigration and Customs Enforcement division of the U.S. government. To counteract this negative publicity, the company has focused on attracting the private sector, divorced from California's Silicon Valley. Its CEO & Co-founder Alexander Karp has publicly and vocally defended the company's work for the government.

Profitability

The company is not yet profitable, but SEC filings show that revenue grew to $742.6 million in 2019 from $595.4 million in 2018, while losses stayed relatively flat at $579.6 million in 2019 and $580 million in 2018. In the first six months of this year, Palantir recorded a loss of $164.7 million on revenue of $481.2 million, reducing its loss and increasing revenue compared to the same period last year. The company forecasted a growth of 46% to 47% in the third quarter, 41% to 43% for the full year of 2020, and greater than 30% for the upcoming year.

Asana

Moskovitz launched Asana in San Francisco in the same year, developing software tools that compete with Atlassian Corporations's TEAM Trello. The company registered $143 million in revenue in its 2020 fiscal year, marking a 86% YoY increase. But net losses grew from $50.9 million in fiscal 2019 to $118.6 million in fiscal 2020. The pandemic resulted in benefits and challenges as it has put a premium value on Asana's business proposition but it has also brought a lot of headaches to its customers who are struggling small businesses.

Financial Performance

Asana also has a way to go to profitability as it reported revenue of $52 million for the three months ended July 31, which marks a 57% YoY increase, but with a net loss of $41.1 million, which is much greater than the $15.6 million loss for the same period last year. For fiscal 2021, Asana projects revenue of $210 million to $213 million, representing year-YoY growth of 47% to 49%.

Outlook

Although many thought 2020 was going to be a bit quieter because COVID-19 has put the entire world to a virtual standstill for the first half of the year along with the election in the other half of the year, it turned out to be one of the busiest periods in history. Aside from these two listings, Wall Street is having 11 IPOs this week, wrapping up the busiest third quarter for offerings since the dot-com bubble. Despite a year overflowing with uncertainty, the public debut market is hotter than ever.

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