Palantir Redefining Analytics, Augmenting Intelligence, & Unlocking Secrets
October 17, 2017

Palantir Redefining Analytics, Augmenting Intelligence, & Unlocking Secrets

Executive Summary

Founded in 2004 by former PayPal executive Peter Thiel, along with Alex Karp, Joe Lonsdale, and Stephen Cohen from Stanford University, Palantir develops data analytics software that addresses fraud prevention, counterterrorism, and other business intelligence tasks. The company’s roots can be traced back to the anti-fraud work done by Peter Thiel at PayPal. In the wake of the 9/11 attacks, PayPal cofounders Peter Thiel and Alex Karp thought their platform could be used to look for terrorists. Eventually, they cofounded Palantir and named the company after a magical, all-seeing crystal ball from The Lord of the Rings. During its early days, Palantir offered products that focused on two verticals: government and finance. Palantir Metropolis provided quantitative analysis for Wall Street banks and hedge funds, whereas Palantir Gotham (formerly Palantir Government) was designed for the needs of intelligence, law enforcement, and homeland security customers.

Today, Palantir’s software works seamlessly by importing reams of structured data (such as spreadsheets) and unstructured data (such as images and social media posts) into one centralized database, where all of the information can be visualized and analyzed.

In terms of fundraising, Palantir has raised about $2.75 billion in total equity capital since its inception. The company’s most recent funding round was completed in January 2016, when it raised about $880 million, resulting in a postmoney valuation of roughly $20 billion. In terms of bookings, we estimate that Palantir is approaching $3.5 billion in 2017, with roughly 40–50% of these bookings coming from government contracts.

Our investment thesis is driven by the growing need for: advanced yet end-user-friendly data analytics, tracing intellectual property back to its government relations, higher spend on big data analytics and cybersecurity.

We feel optimistic about Palantir’s execution and track record to date, given the large number of enterprise and government agencies that continue to adopt the platform. Palantir faces challenges associated with potential pricing deleverage and converting bookings to cash; however, the key issue for investors to monitor over the next eighteen to twenty four months is the effect of competition and the mix-shift from government/services revenues on Palantir’s profit margins.

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PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES

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This report is 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 financial advisors before making any investment decisions. 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 prudence 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 the subject matter therein, including all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be during their employ directly or indirectly related to their specific views contained in this report.

Analyst compensation is indirectly based upon the growth and success of SharesPost, Inc., including the overall performance of its subsidiaries, the individualized performance of any such analyst, and the development and progression of the overall research effort. SharesPost, Inc. earns revenue from, among other avenues, brokerage sales, and therefore the analyst may indirectly benefit from research reports that have the ultimate effect of increasing trading activity, either through SharesPost Financial Corporation and/or with SharesPost Investment Management, LLC.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, transaction, or security. The opinions expressed in this report reflect the judgment of the analyst at a specific point in time and are subject to change. The information contained in this report has been obtained from sources the analysts consider to be reliable; however, there is no guarantee the any of the information is accurate.

Securities referenced in this report may be 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, involving a high degree of risk, and investors should 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 investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or 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.