Palantir...Privacy & Controversy...Two Words That's Not In There Mission Statement

Palantir was the largest privately held Silicon Valley technology company backed by billionaire and Facebook’s first outside investor, Peter Thiel. Created in the aftermath of 9/11 with the aim of protecting the United States from future terror attacks, Palantir has become one of the nation’s most controversial companies. Palantir specializes in business intelligence and data-mining, much of which it does to government agencies. It now has about $1 billion in federal government contracts, including recently, to the Defense and Space Force. Many of the data mining jobs are located at the NSA, where they use them to help collect information on terrorists and other international threats.

However, many years ago, Palantir started working with companies. The companies’ computer programs, artificial intelligence software and services also provides business intelligence. This is more of the type of work that businesses use to find out information about their competitors and what they can do to take over their market. By having access to this kind of information, they can learn ways to get ahead of their competition and stay ahead of the curve, or even figure out how to change course entirely. For example, if they found out their competition was buying software from another company, then they could buy their own version and become the software vendor.

Business all over the world need reliable software to help them run their operations more efficiently. Palantir analyzes a boat load of information and generates reports that show the best use of time. Their software finds patterns and trends within large amounts of information and determine which areas need the most attention.

The company has two product lines: Gotham and Foundry. Gotham was the first product to market and is focused on public sector customers like U.S. defense and intelligence agencies. Foundry, created later, serves similar products for private enterprises including Airbus, Credit Suisse, and BP. In 2019, 53% of Palantir’s revenue came from commercial clients, with the remaining 47% from government agencies.

After almost twenty years Palantir went public and had an ipo (initial public offering) in late September. The name Palantir was named after a mystical, all-powerful seeing stone in "Lord of the Rings." In the book/movie, the wizard Saruman, uses a "palantir" to surveil his enemies.

Recently the company announced their earnings. For the quarter, the tech company had tremendous revenue growth The company reported revenue of $289.4 million, up 52%, and ahead of the company’s guidance range of $278 million to $280 million.

This made some investors very happy and some investors could no longer support the company’s mission.

On Monday, Steven Cohen’s Point72 Asset Management disclosed it acquired 29.9 million shares of Palantir, or a 2.6% stake, while Anchorage Capital Group acquired just under 3 million shares for a 0.3% stake, according to Securities and Exchange Commission filings.

That follows Friday’s disclosure that George Soros’s eponymous Soros Fund Management scooped up 18.5 million shares for a 1.6% stake of Palantir, and Daniel Loeb’s Third Point holds 2.4 million shares. In a report Tuesday, however, Soros Fund Management told CNN that it had already sold the reported stake because it doesn’t approve of the company’s business practices and that the hedge fund “made this investment at a time when the negative social consequences of big data were less understood.”

Now this may scare away potential investors, especially since they been working with customs enforcement and undocumented immigrants, but not Cathie Wood. Cathie added 1,025,700 shares of Palantir to the Ark Next Generation Internet ETF. However, Palantir represents less than 1%. My family will tell you I’m a capitalist, so I have been long the stock via options around the $14 level.

Last week, Morgan Stanley analyst Keith Weiss downgraded the stock citing valuation as the company. But Keith also mentioned the company is showing no sign of slowing down either. The chart suggests, a pull back to the daily demand at $14, would be a nice level to go long..

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

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