Palantir Grabs $21 Billion Valuation With Direct Listing as Trading Begins
Data firm joins Asana trading on NYSE in pair of direct listings Wednesday
Palantir Technologies Inc. PLTR 31.03% grabbed a valuation of roughly $21 billion in its trading debut on the New York Stock Exchange, as it became the latest technology company to try its hand at a direct listing.
The stock closed at $9.50, higher than the $7.31 and $9.17 average prices where the stock changed hands in private trades in August and September, respectively. It ended 31% above the reference price of $7.25 a share, a guidepost that is set by the NYSE where no money changes hands.
The few direct listings that have happened to date have all traded above their reference prices on the first day.
The first Palantir trade on Wednesday landed around 1:40 p.m. in New York at $10. The Wall Street Journal reported last week that Palantir’s bankers had told investors the stock could start trading around $10.
The data-mining software company became the fourth notable firm to use the direct listing model. Asana Inc. ASAN 37.14% also went public through a direct listing earlier Wednesday, with its stock trading higher in its debut. Only two other major companies— Spotify Technology SA and Slack Technologies Inc. —had ever completed direct listings before Wednesday.
Doing a direct listing skirts investment-banking underwriters, allowing companies to save millions of dollars in fees. It also means the companies don’t raise money for themselves. Instead, employees and early investors are typically able to cash out stock on the first day of trading as shares simply list on the exchange and advisers match buyers and sellers.
Both Asana and Palantir enlisted Citadel Securities as their designated market maker and Morgan Stanley as their lead financial adviser for their debuts.
Strong debuts for the two listings are the latest sign of strength in the IPO market as companies are rushing to go public and investors are especially hungry for technology listings. U.S.-listed IPOs have raised more than $98 billion this year through Tuesday, according to data provider Dealogic. That surpasses the amount raised in every full year of listings since the tech boom of 1999 and 2000. If this pace continues, bankers, lawyers and executives say they anticipate the IPO market to even beat those years when measured by amount of money raised.
“September will close out to be the busiest month in the history of NYSE when it comes to new listings,” said John Tuttle, vice chairman and chief commercial officer who oversees global listings at the NYSE, referring to the number of new listings this month. “Even through the highs and lows [of 2020], capital markets have remained open for companies and investors.”
The strong investor interest in Palantir comes even as its founders have put in place one of the most aggressive governance structures ever seen.
Tuesday’s dueling direct listings were a balancing act for the NYSE, which had never dealt with opening two on the same day. Given the relatively untested nature of direct listings and their complexities, some people close to the Palantir and Asana offerings had told the Journal they weren’t thrilled that two were happening on the same day.
Both Slack and Spotify’s direct listings went fairly smoothly, with the two companies closing 49% and 13% higher than their respective reference prices on their first trading day.
Since then, the trading success of the two companies has diverged. Slack closed Wednesday at $26.86, 30% below where it closed on its first day of trading last year. Shares of Spotify, meanwhile, had mostly languished below their first-day closing price of $149.01 in 2018 until they shot higher this year. They closed Wednesday at $242.57, up 63% from the first-day close.
Like many other tech companies that go public, Palantir has never made a profit. For 2019, it posted a loss of $579.6 million, roughly even with 2018. The first half of 2020 showed improvement, with a $164 million loss compared with a $274 million deficit in the same period in 2019.