Palantir discloses diluted share count, suggesting valuation north of $20 billion at high end

Key Points
  • Palantir said in its third updated prospectus on Monday that it has 2.17 billion fully diluted shares, including over 250 million options and restricted stock units that haven't vested.
  • The company's valuation could thus be well above $20 billion if public investors are willing to buy the shares where they've traded most recently in the private market.
  • Palantir is pursuing a direct listing rather than a traditional IPO, meaning it's not raising capital and is instead allowing existing stakeholders to sell shares to new investors.
Palantir Technologies CEO Alex Karp arrives at the "Tech for Good" Summit in Paris, France May 15, 2019.
Charles Platiau | Reuters

In its third updated public offering prospectus, Palantir finally disclosed a fully diluted share count, providing a total that includes some unvested options and restricted stock. 

Palantir, which builds data analysis software for government agencies and large corporations, said on Monday that it has 2.17 billion diluted shares. The potential valuation range remains very wide.

Between the beginning of August and Sept. 1, shares on the private market traded for between $4.17 and $11.50, according to the company. Taking into account full dilution, that would translate to a valuation range of between $9.3 billion and $25 billion.

However, the initial market cap likely won't reflect all of those shares because some terms haven't been satisfied for vesting of options and restricted stock units, or RSUs. Here's what Palantir says in a footnote of the filing:

"The fully diluted share count as of September 1, 2020 would have been 1,922,795,329, excluding the 250,686,600 shares that are issuable with respect to outstanding options and RSUs that have been granted but have not yet vested or satisfied the service-based vesting condition per their terms."

Palantir is pursuing a direct listing, scheduled for next week, instead of a traditional IPO. That means the company won't be raising fresh capital but will instead allow existing stakeholders to sell a portion of their shares to new investors. Some investors told CNBC that the price could be inflated when Palantir goes public because there will be very few shares available for trading. Palantir said in its prospectus that 1.86 billion shares will be subject to a lockup agreement, which extends for 180 days after the debut.

Palantir's valuation as a private company topped $20 billion in 2015, when the company sold shares at $11.38 a piece. Since then, fund managers have marked down the stock as the company struggled to grow with a small set of customers, largely from the government. However, the average share price has climbed since July, when Palantir filed confidential paperwork to go public.

The average price rose to $7.31 in August from $5.34 in July and reached $9.17 on Sept. 1, the last day that private trades could occur.

CNBC reported last week, based on an average third-quarter price of $6.45, that investors were valuing Palantir at about $10.5 billion. At the time Palantir said its share count was 1.64 billion. Until Monday, the company had yet to release a fully diluted number.

In the first half of 2020, Palantir's total revenue jumped 49% to $481.2 million, with just over half its sales coming from government customers. Costs for sales and marketing and research and development dropped, allowing Palantir to narrow its net loss to $164.7 million from $280.5 million.

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