Palantir just officially laid out its plans to go public in a direct listing

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Palantir just officially laid out its plans to go public in a direct listing
Alexander Karp, chief executive officer and co-founder of Palantir Technologies Inc., attends the Allen & Company Sun Valley Conference on July 7, 2015 in Sun Valley, Idaho.Scott Olson/Getty Images
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Palantir Technologies, the notoriously secretive tech firm, revealed registration documents for a public stock listing on the New York Stock Exchange on Tuesday, providing one of the first comprehensive looks at the company's inner financial workings.

The public debut follows a slew of software initial filings this month, as well as two recently public Silicon Valley peers, Spotify and Slack, in going the direct-listing route. No capital will be raised through Palantir's listing, nor will any new shares be available for sale, but the move gives existing investors a pathway to selling their shares.

But the 17-year-old company, cofounded by Peter Thiel, could test Wall Street's appetite for tech stocks, even at a time when the market for tech initial public offerings is red hot. Palantir revealed in its prospectus that it had never had a profitable year in its history and that it posted net losses of roughly $580 million in each of the past two years.

The company's revenue totaled $742.6 million in 2019, up 25% from the prior year. As recently as April, the company expected to hit $1 billion in revenue this year, Bloomberg reported.

"The broader momentum of our business is the result of the strength of our software platforms," Palantir said in its prospectus, "and the need for software that works has never been greater."

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The prospectus also reveals high compensation for Palantir's three executives. Its cofounder and CEO, Alexander Karp, took home more than $12 million in salary and stock options last year, while its president, Steve Cohen, and its chief operating officer, Shyam Sankar, received roughly $16 million and $26 million.

Thiel is not involved operationally at Palantir but is the chairman of its board of directors.

A special multi-class stock structure means Palantir's founders will keep a tight grip on the firm, with at least 49.99999% of the voting power so long as they maintain a certain level of ownership in the company.

Palantir just officially laid out its plans to go public in a direct listing
Peter Thiel.Joe Raedle/Getty Images

Go deeper: Secretive Palantir Technologies is preparing to go public. But behind the cloak-and-dagger image, insiders and investors say, it's struggled to build a steady revenue model.

The company's stock is expected to be listed on the NYSE on September 24, as Business Insider previously reported, with shares trading under the PLTR ticker. But existing shareholders, including employees and private investors, will be able to sell only a limited, unspecified portion of their holdings at that point (some media reports have said sales will be capped at 20% of an individual's shares).

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The lock-up on insider selling — which is unusual in a direct listing — is to be lifted three days after Palantir reports earnings for its December quarter, which suggests sometime in January.

'We seem to share fewer and fewer of the technology sector's values and commitments'

Cofounded in 2003 by the PayPal alum and Facebook board member Thiel, Palantir has grown into one of the most valuable startups in the US, with $2.75 billion in venture capital raised and valuations as high as $20 billion. Karp, Thiel's Stanford Law School classmate, has served as chief executive since 2004.

Palantir just officially laid out its plans to go public in a direct listing
Activists protest in front of Palantir's cafeteria in Palo Alto, CARosalie Chan

But Palantir has stood as something of a misfit in progressive-minded Silicon Valley, drawing protests over its work with the military and government immigration agencies, a fact the company noted in its filing and attributed to the recent move of its corporate headquarters to Denver.

"Our company was founded in Silicon Valley," Karp said in a letter accompanying Tuesday's filing, "but we seem to share fewer and fewer of the technology sector's values and commitments."

Palantir's S-1 touts the fact that its engineers are "on the front lines" at military bases in Afghanistan, and the tech company vows that it will not do business with China's governing Communist Party.

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The company's clients include US government agencies such as the FBI, the CIA, and the Department of Defense, as well as law-enforcement agencies around the world. Many of those connections, including dealings with Immigration and Customs Enforcement, the US agency responsible for enforcing President Donald Trump's crackdown on illegal immigration, have come under intense scrutiny in recent years.

Palantir just officially laid out its plans to go public in a direct listing
A screenshot of Palantir's "Gotham" product aimed at government defense and intelligence agenciesPalantir S-1

Palantir's government contracts, along with commercial clients, make up a total addressable market of $119 billion, the company said.

"The challenges that we face, and the crises that we have and will continue to confront, expose the systemic weaknesses of the institutions on which we depend," Palantir said. "Our industrial infrastructure and manufacturing supply chains were conceived of and constructed in a different century. Government agencies have faltered in fulfilling their mandates and serving the public. Some institutions will struggle to survive. Others will collapse."

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