'Transparency is a Great Thing': Secretive Big Data Firm Palantir Goes Public

Tami Abdollah

Tami Abdollah was dot.LA's senior technology reporter. She was previously a national security and cybersecurity reporter for The Associated Press in Washington, D.C. She's been a reporter for the AP in Los Angeles, the Los Angeles Times and for L.A.'s NPR affiliate KPCC. Abdollah spent nearly a year in Iraq as a U.S. government contractor. A native Angeleno, she's traveled the world on $5 a day, taught trad climbing safety classes and is an avid mountaineer. Follow her on Twitter.

'Transparency is a Great Thing': Secretive Big Data Firm Palantir Goes Public

Palantir Technologies' stock rose more than 30% after the enigmatic, big data analytics company officially went public with a direct listing on the New York Stock Exchange Wednesday.

The stock under the ticker symbol PLTR ended the day at $9.50 per share or $2.25 above its $7.25 reference price.

Direct listings are less common than IPOs which rely on investment bankers to underwrite an offering, but companies including Slack Technologies and Spotify have moved forward, betting on their broad brand name recognition, and to avoid incurring extra fees. Under the arrangement, employees and other early investors directly sell their shares upon the company's Wall Street debut.

But, Palantir's direct listing is unique in that it includes a lockup period that prevents employees and legacy investors from selling most of their stock. Analysts say this provides new shareholders the opportunity to participate in the listing without substantial risk of short-term decline in price.

Palantir's software offerings, including Gotham and Foundry, are used by 125 customers across more than 150 countries and in 36 industries. It has touted its government work as "central to defense and intelligence operations in the United States and its allies abroad," according to its Securities and Exchange Commission filing.

Industry analysts expressed concern that the company's overall customer count is low. Palantir Chief Financial Officer David Glazer declined to discuss how many of its clients are government versus enterprise in an interview Wednesday. Though it has increased its focus on the commercial market, Palantir's government portfolio has increased to 54% in the first half of 2020, wrote analyst Rohit Kulkarni, executive director of MKM Partners, in a note.

Glazer said that due to the company's 17-year history, "there's a real moat" that competitors have to overcome to match their software abilities. Glazer said that the company essentially "turned off our growth machine" to build out Foundry.

"You're really going to see us be able to scale" to more customers faster and at lower cost," Glazer said. "No one else is going to be able to do that without a huge amount of resources, huge amount of engineering talent against it, and so I think we have a very strong moat."

Analysts ask: Does it Scale?

Because many of Palantir's largest and legacy customers are governments, Brendan Burke, a senior emerging tech analyst with PitchBook, said the overall low customer count "suggests that the platform has not scaled rapidly across new customers" and that Palantir "earns a relatively small percentage of its revenue from (those) recently won customers." He added that the company "will be challenged to maintain its expected 2020 revenue growth of 42% year-over-year given its reliance on new government contract wins and the long sales cycle of its data integration platform Foundry."

In its filings, Palantir estimates its total addressable market to be roughly $119 billion over both commercial and government sectors. And it has provided its software to commercial industries, including energy, transportation, financial services and healthcare. Burke said he found the addressable market in terms of actual end-user spending for data analytics is in the range of $24 billion, multiple times below Palantir's assessment.

For now, the company remains far from profitable. In its SEC filing, it warned investors that it has "incurred losses each year since its inception" and "may never achieve or maintain profitability."

While the company reported $742.6 million in revenue in 2019, it saw a loss of $579.6 million. Similarly, in 2018, the company recorded a $580 million loss on $595.4 million revenue. So far, in the first half of 2020, Palantir has reported a $164.7 million loss on $481.2 million in revenue.

Palantir, which employs more than 2,390 people globally, said it's in the process of entering new and emerging markets, including its newer foray into COVID-19 response efforts as well as defense, law enforcement, national security, and government agencies.

As of the first half of 2020, it reported its total remaining deal value of contracts awarded by government agencies was $1.2 billion.

Formerly based in Palo Alto, Calif., Palantir co-founder and chief executive Alexander Karp wrote a scathing rejection of Silicon Valley culture in his introduction to the company's S-1 filing, and the company moved its headquarters to Denver, Colorado this summer.

Founded in 2003, Palantir has always been accused of secrecy because of its government-related work, but it does have legit U.S. intelligence roots. The company's only early outside investment came from the Central Intelligence Agency's venture capital arm, In-Q-Tel, which helped develop its software to analyze reams of siloed data. Their tech was particularly well-suited to intelligence agency uses and has been primarily used for counterterrorism as well as law enforcement since its early days. Today it's used by the U.S. military, including the U.S. Special Operations Command, the Centers for Disease Control, the Department of Homeland Security and Securities and Exchange Commission, among others.

The use of its software by DHS has led to accusations that its software is being used by ICE to help it find and deport immigrants under the Trump administration. And the company has seen activists protest outside of its now former Palo Alto offices as a result. Co-founder and billionaire investor Peter Thiel is a prominent supporter of President Donald Trump.

Glazer said "the problem set that our software is deployed against is complex, it's nuanced, and we welcome the internal discussion." He added that "transparency is a great thing for the company" and that by going public "we'll be able to share more over time about our customers" though that will be more difficult for customers in the intelligence and government sector.

Kulkarni, the executive director of MKM Partners, wrote that "Palantir's products look extremely robust and truly 'battle tested'" — its software can be installed on a submarine and a tablet with no internet connectivity, for example — but that it is still early days with direct sales.

In addition to lack of profitability, investment risks include the company's many shareholders — and likely sellers once the lockup period ends after the company announces fourth quarter earnings. Its top three customers make up 33% of its revenue in 2018 and in 2019, those customers made up 28% and had been with the company on average for eight years.

Kulkarni criticized Palantir for providing a "very limited disclosure" even though it has more than 15 years of operating history.

"We found Palantir's S-1 filing fairly light on customer trends, SaaS metrics," Kulkarni wrote. "Also, the company has disclosed only six trailing quarters worth of financials and has not provided any guidance."

Still, Kulkarni wrote that he expected significant investor appetite given the company's "enigmatic" history and ongoing IPO pricing trends. He added that the company would trade at a slight discount to its relative growth rate, given its customer concentration, unclear visibility and customer size.

Palantir's Unconventional Voting Structure

'Transparency is a Great Thing': Secretive Big Data Firm Palantir Goes Public

The company's voting and governance structure has given many industry analysts pause. Michael Weisbach, the Ralph W. Kurtz finance chair at Ohio State University's Fisher College of Business, said it creates an extra class of stock that gives founders effective control of the company no matter how much stock they actually own.

Such efforts are "the exception but not that rare," and he noted that the Ford family set up a similar structure to ensure their control of Ford Motor company as did Comcast. The variable structure allows the founders to control up to 49.999999% of the total voting power of the stock.

Burke, a senior emerging tech analyst with PitchBook, said that while it's common for founder-led startups to remain controlled by the founder, Palantir has further pushed the envelope with this new share class structure.

"The broader impact is limiting the ability of shareholders to influence the company's strategy," Burke said. "This share class structure prevents common shareholders from making activist decisions for the company's future."

Kulkarni wrote that the structure gives the company's three founders "unilateral voting control over the company in perpetuity."

Burke said this is a continuing trend in the market, especially because there hasn't been significant pushback from investors.

Other concerns include worries about the "growing ethical orientation of investors" that could lead to backlash over Palantir's involvement with government agencies "shown to violate human rights," Burke said. "We haven't seen the company adapt to these concerns yet."

Perhaps to assuage this concern, Palantir pointed to its privacy and civil liberties safeguards, its focus on supporting "Western liberal democracy and its strategic allies" and it also took a stand on the Chinese Communist Party, assuring investors perhaps wary of another ByteDance Ltd.-related debacle that it doesn't work with the party or host its platforms in China because it is "inconsistent with our culture and mission."

*Editor's Note: Spencer Rascoff, the executive chairman and cofounder of dot.LA and Zillow, has been a member of Palantir's board of directors since July 2020 and is also an investor in the company.


Do you have a story that needs to be told? My DMs are open on Twitter @latams. You can also email me at tami(at)dot.la, or ask for my Signal.


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Is Airbnb’s New Push To Expand Short-Term Rentals Enough for Hosts To Combat LA’s City Policy?

Amrita Khalid
Amrita Khalid is a tech journalist based in Los Angeles, and has written for Quartz, The Daily Dot, Engadget, Inc. Magazine and number of other publications. She got her start in Washington, D.C., covering Congress for CQ-Roll Call. You can send tips or pitches to amrita@dot.la or reach out to her on Twitter at @askhalid.
LA house

L.A.’s lax enforcement of Airbnbs has led to an surge of illegal short-term rentals — even four years after the city passed a regulation to crack down on such practices. But what if hosts lived in a building that welcomed Airbnb guests and short-term rentals?

That’s the idea behind Airbnb’s new push to expand short-term rental offerings. The company is partnering with a number of corporate landlords that agreed to offer “Airbnb-friendly” apartment buildings, reported The Wall Street Journal last week. According to the report, the new service will feature more than 175 buildings managed by Equity Residential, Greystar Real Estate Partners LLC and 10 other companies that have agreed to clear more than 175 properties nationwide for short-term rentals.

But prospective hosts in Los Angeles who decide to rent apartments from Airbnb’s list of more than a dozen “friendly” buildings in the city likely won’t earn enough to break even due to a combination of high rents, taxes and city restrictions on short-term rentals. Rents on one-bedroom apartments in most of the partnered buildings listed soared well over $3,000 a month. Only a few studios were available under the $2,000 price range. If a host were to rent a one bedroom apartment with a monthly rent of $2,635 (which amounts to $31,656 annually), they would have to charge well over the $194 average price per night for Los Angeles (which amounts to $23,280 per year) according to analytics platform AllTheRooms.

Either way, residents who rent one of these Airbnb friendly apartments still have to apply for a permit through the City of Los Angeles in order to host on Airbnb.

“[..Airbnb-friendly buildings] seems like a good initiative. However, from a quick look, it seems that given the rent, Airbnb revenue wouldn’t be enough to cover all expenses if the host follows the city’s policy,” says Davide Proserpio, assistant professor of marketing at the USC Marshall School of Business.

In addition, since L.A.’s 120-day cap on short-term rentals still applies to the buildings on Airbnb’s listing platform, that greatly limits the number of longer-term guests a resident can host. Not to mention, some of the buildings that Airbnb lists have even shorter limits – The Milano Lofts in DTLA for example only allows residents to host 90 nights a year.

Airbnb’s calculations of host earnings may be greatly misleading as well, given that the estimate doesn’t include host expenses, taxes, cleaning fees or individual building restrictions. For example, Airbnb estimates that a resident of a $3,699 one bedroom apartment at the Vinz in Hollywood that hosts 7 nights a month can expect $1,108 a month in revenue if they host year-round. But the Vinz only allows hosts to rent 90 days a year, which greatly limits the potential for subletters and a consistent income stream.

Keep in mind too that since the apartment will have to serve as the host’s “primary residence”, hosts will have to live there six months out of the year. All of which is to say, it’s unclear how renting an apartment in an “Airbnb-friendly” building makes hosting easier — especially in a city where illegal short-term rentals already seem to be the norm.


The Streamys Reveals The Disconnect Between Online Creators and Traditional Media

Kristin Snyder

Kristin Snyder is dot.LA's 2022/23 Editorial Fellow. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.

tiktok influencers around a trophy ​
Andria Moore /Charli D'Amelio/Addison Rae/JiDion

Every year, the Streamy Awards, which is considered the top award show within the creator economy, reveals which creators are capturing the largest audiences. This past Sunday, the event, held at The Beverly Hilton, highlighted some of the biggest names in the influencer game, chief among them Mr. Beast and Charli D’Amelio. It had all the trappings of a traditional award show—extravagant gowns, quippy acceptance speeches and musical interludes. But, as TikTok creator Adam Rose told The Washington Post, the Streamys still lacks the legitimacy of traditional award shows.

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Slingshot Aerospace Is Expanding Its Network of Telescopes To Make Tracking Data Even More Accurate

Samson Amore

Samson Amore is a reporter for dot.LA. He holds a degree in journalism from Emerson College and previously covered technology and entertainment for TheWrap and reported on the SoCal startup scene for the Los Angeles Business Journal. Send tips or pitches to samsonamore@dot.la and find him on Twitter @Samsonamore.

Slingshot Aerospace Is Expanding Its Network of Telescopes To Make Tracking Data Even More Accurate
Photo: Slingshot Aerospace

Slingshot Aerospace, the El Segundo-based startup developing software for managing objects in space’s orbit, raised $40.9 million to build out its global network of sensors and recruit new customers both private and public.

The round was a follow-on to Slingshot’s $25 million Series A-1 raise in March.

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