Palantir, Asana claim healthy valuations in public debuts

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Investors showed a strong appetite for shares of Palantir Technologies and Asana after the pair became the first major companies to go public through a direct listing in more than a year. 

On a fully diluted basis, Palantir captured a valuation of $20.6 billion at Wednesday’s closing price of $9.50 per share. That represents a higher price than recent secondary market trading, as well as the $4.65 per share price that Japanese insurer Sompo Holdings paid when the two companies entered a joint venture at the end of last year. Palantir’s highest private market valuation was $20.3 billion in 2016, according to PitchBook data.

San Francisco-based Asana closed at $28.80 per share, giving it a fully diluted market value of roughly $5.8 billion. In 2018, the enterprise software maker was valued at $1.5 billion, PitchBook data shows.

Both Palantir and Asana traded well above the New York Stock Exchange’s reference prices of $7.25 and $21 per share, respectively. The reference price is merely a guidepost set by the exchange for investors.

For Palantir, the long-awaited exit was soured by the release of a letter to the SEC from House representatives Alexandria Ocasio-Cortez and Jesús García, who said the Denver-based data analytics provider’s lack of certain disclosures represented a “material risk” to investors.

Among the concerns raised in the letter were Palantir’s work with the government of Qatar, the independent status of board member Alexander Moore, and a 2005 investment made by In-Q-Tel, the venture capital arm of the CIA, which was not mentioned in Palantir’s registration statement.

The publication of the letter on Wednesday afternoon likely caused some investors to become “skittish,” said Morningstar equity analyst Mark Cash, who estimates the company’s fair value is $28.2 billion. At its peak on Wednesday, Palantir’s stock traded at $11.42 per share before falling throughout the afternoon.

Palantir, whose work remains cloaked in mystery, is still fundamentally misunderstood by investors, Cash believes. “People think [Palantir is] a government contractor, first and foremost. But if you look at the financials, they are more diversified than people think,” he added.

The company’s work with corporate clients, which represented 53% of its business last year, will be a larger driver than government contracts over the long term, Cash said. Palantir earns 60% of its revenue from customers outside of the US.

Palantir’s use of a typical SaaS model should also help it to claim margins that more closely resemble tech companies than defense contractors such as Raytheon, according to Cash.

Neither Palantir nor Asana raised any cash in their direct listings. However, both the NYSE and Nasdaq are pushing for rule changes that would permit such capital raises.

Featured image via Yuichiro Chino/Getty Images
 

Related read: As Palantir and Asana revive direct listings, will others follow?

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