Palantir Declines as 80% of Shares Unlock for Trading

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(Bloomberg) — Palantir Technologies Inc. slid 6% in the first hour of trading Thursday after a flood of shares became eligible to sell for the first time.

© Bloomberg A banner displays Palantir Technologies Inc. signage during the company’s initial public offering (IPO) in front of the New York Stock Exchange (NYSE) in New York, U.S., on Wednesday, Sept. 30, 2020. Shares of Palantir Technologies, a data mining company co-founded by technology billionaire Peter Thiel, opened trading today on the New York Stock Exchange at $10 after the company sold shares to investors in a direct offering.

The company has amassed a long list of shareholders in the nearly two decades since it was founded. On Thursday, almost all of them have the option to sell as much of their stock as they’d like for the first time.

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Four-fifths of shares are becoming eligible to trade, the result of an unusual restriction placed on stockholders when Palantir went public. Such lockups are common after initial public offerings but less so for companies that list their shares directly on an exchange, as Palantir did on the New York Stock Exchange in September.

Two longtime investors said in interviews that they will hold, but at least one other, billionaire George Soros, has publicly signaled his plans to exit. The shares were down about 8% at the start of trading in New York.

The expiration of a lockup is a volatile time for any company but could be especially so for Palantir, which was privately held for an exceptionally long time and which courts a great deal of controversy. Its co-founder and chairman is Peter Thiel, the venture capitalist who backed Donald Trump’s successful bid for the U.S. presidency and became a pariah in Silicon Valley. Palantir, which relocated from the Valley to Denver, works with the military, immigration enforcement and intelligence agencies, all of which draw public scrutiny and howls for surveillance overreach.

Soros Fund Management, which revealed in November it began investing in Palantir in 2012 and owned 18.46 million shares, has said it will sell for ethical reasons. The firm said at the time that it had sold all it was able to and “will continue to sell shares as permitted.”

“SFM does not approve of Palantir’s business practices,” the firm said in a statement last year. “SFM made this investment at a time when the negative social consequences of big data were less understood. SFM would not make an investment in Palantir today.”

Palantir still has plenty of believers. Its tools are used by corporate titans like BP Plc and Merck KGaA as well as governments around the world, nearly a dozen of which are using Palantir to battle Covid-19 and power vaccine distribution. Adit Ventures, which said it holds about $270 million worth of Palantir, told Bloomberg it will sell few, if any, shares on Thursday. Ditto for PHX Financial, which said it holds more than $10 million. Ark Invest has also indicated its support.

Palantir’s stock has more than tripled since going public. But the lockup loomed over the company’s quarterly financial report on Tuesday. Despite exceeding analysts’ expectations on revenue and other measures, concerns about growth prospects and the lockup expiration sent the stock falling.

Speaking in a prerecorded video shown to investors Tuesday, Chief Executive Officer Alex Karp walks through snowy woods and discusses the perils of technology companies managing for quarterly expectations and “near-term myopism.”

Cathie Wood, CEO of Ark Invest, backs that philosophy. “Palantir’s attitude is refreshing,” she said in an interview on CNBC. “It’s exactly how we invest. We want our companies to invest aggressively. We don’t want profits now.”

(Updates shares in the first paragraph.)

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