Palantir: Ready for an IPO?
February 6, 2019

Palantir: Ready for an IPO?

2018 has been a great year for IPOs and we believe the same for 2019. Several large unicorns, including Palantir, plan to go public next year. Having operated as private firms for several years, these companies focused on growth, not profitability. However, investors increasingly want to see a path to profits for these large, late stage companies. Evidence suggests Palantir could be profitable by its IPO as the company continues to shift its revenue from government services to enterprise subscriptions.

Palantir’s reported IPO in 2019 has attracted a great deal of attention. The company is believed to be profitable next year, according to the CEO, Alex Karp, and is in talks with investment banks on a planned public offering. Over the past year, Palantir has seen a range of valuations ranging from $20 billion to most recently $41 billion.

If Palantir goes public in 2019, potential public investors will likely calculate the company’s enterprise value based on a blended average of 2019 and 2020 financial estimates. We realize there are a lot of “ifs” in this scenario. However, using publicly available information and applying reasonable growth rates to Palantir’s bookings and net revenue ratio, we believe Palantir’s revenue could hit $2.2 billion in 2019 and $3.0 billion in 2020, expanding at an annual pace of 30 percent. Based on our revenue estimates and a 6-7x EV multiple estimate, we believe Palantir could be valued at $20 billion, in line with the current private valuation. And, it has the potential to go higher if it continues to improve its bookings-to-revenue conversion coupled with its ongoing shift towards a more enterprise SaaS revenue model.

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PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES

CONFLICTS

This report is being published by SharesPost Research LLC, and distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation and SP Investments Management, LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or advisability of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

ANALYST CERTIFICATION

The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about any and all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be, directly or indirectly related to the specific views contained in this report.

Analyst compensation is based upon various factors, including the overall performance of SharesPost, Inc. and its subsidiaries, and the performance and productivity of such analyst, including feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost, Inc., including brokerage sales.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk. It should only be considered as a long-term investment. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2019. All rights reserved.