Palantir slumps as a lockup expiration opens 80% of its shares for trading

This article was originally published on this site

Palantir logo on the New York Stock Exchange.

  • Palantir’s stock sank on Thursday as a lockup expiration allowed 80% of the company’s shares to trade on the open market.
  • Citi analyst Tyler Radke warned of a potential fall due to the lockup expiration in a note to clients in January.
  • Cathie Wood, CEO of Ark Invest, said she still believes Palantir is headed in the right direction as it spends on innovation.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Palantir’s stock sank on Thursday after a lockup expiration freed some 80% of the company’s shares to trade on the open market. The stock was down as much as 7% shortly after the opening bell. 

Palantir had seen its share price more than triple since going public before a surprise earnings loss on Tuesday hurt momentum. Still, the company’s stock was up roughly 185% over the last six months prior to Thursday’s fall.

When the Denver-based firm went public via a direct listing back in September, early investors were forced to hold their shares due to a lockup clause. Now that the clause has expired, it means a number of big investors in Palantir could be looking to cash out amid the recent rally in the share price. If they do, it could drive the stock down significantly.

Citi analyst Tyler Radke warned about such an event back in January. The analyst downgraded Palantir to “sell” in a note to clients, claiming the Big Data company’s high valuation, decelerating growth, and lock-up expiration could lead to a sell-off.

Some big-time Palantir investors have already said they “will continue to sell shares as permitted.”

Soros Fund Management, which revealed in November it began investing in Palantir in 2012 and owned 18.46 million shares at one time, has said it will continue to divest from the Big Data firm.

“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 a bevy of supporters, including numerous analysts. Goldman Sachs analysts more than doubled their price target to $34 per share for the Big Data firm after Tuesday’s earnings, citing a path to “sustainable growth.”

Another big Palantir supporter is Cathie Wood, CEO of Ark Invest.

In an interview with CNBC on Wednesday, Wood said Palantir’s CEO Alex Karp was “speaking our language” in the quarterly conference call and that the company’s aggressive investments are the right path forward. Sacrificing near-term profitability for long-term growth is a net positive. according to Wood.

The CEO argued companies “have not been spending enough on innovation” and praised Palantir for its “refreshing attitude.”

“We don’t want profits now, we want them to invest aggressively,” Wood said.

Palantir stock traded at $25.93 as of 9:53 AM E.T. on Thursday.