The S-1 disclosures that tech companies file with the SEC before a stock listing have grown in entertainment in recent years. At barely 250 pages, the prospectus for Palantir Technologies is almost unputdownable.
The comedy memes first established by Uber and WeWork all recur: the disregard for old-fashioned notions of return – “we may never achieve or maintain profitability” – and the embrace of non-GAAP accounting BS, including the infamous contribution margin.
This suggests that investors should look at the cost of a companies’ revenue as just marketing and customer acquisition, while ignoring those other pesky running expenses, such as paying employees.
Palantir’s, presumably, don’t come cheap. Chief executive and founder Alexander Karp says: “Our company is a creative enterprise, filled with strong personalities who are immensely talented.”
Maybe that’s why revenues still don’t exceed expenses 17 years on from its founding.
Palantir was established in 2003, with seed funding from the CIA, in the belief that US intelligence agencies had all the data to spot the build-up to the 9/11 terrorist attacks, but couldn’t link it together.
[Silicon Valley may know more than most about building software] but they do not know more about how society should be organized or what justice requires
Alexander Karp, Palantir
Palantir’s biggest group of customers are US government intelligence and defence agencies, and those of some US allies.
Karp doesn’t spare their feelings. “Our customers come to us because their technological infrastructure has failed them.” Palantir aims to embed its software at their very centre.
That raises big ethical questions. Everyone wants surveillance to catch the bad guys: no one wants to be subject to it themselves.
Though Karp told the New York Times in 2018 that he voted for Hillary Clinton in the last election, Palantir co-founder Peter Thiel is the most famous tech investor to back Donald Trump.
And there’s something quite Trumpian about Karp’s analysis of Palantir’s total addressable market.
He riffs on the systemic weaknesses of the institutions on which we depend. “Government agencies have faltered in fulfilling their mandates and serving the public. Some institutions will struggle to survive. Others will collapse.”
Look at this mess: only we can fix it.
Silicon Valley
He excoriates the values of Silicon Valley, claiming to have repeatedly turned down opportunities to sell, collect or mine data for advertising revenue. “Other technology companies, including some of the largest in the world, have built their entire businesses on doing just that.”
How awful of them.
Karp thunders that the engineering elite of Silicon Valley may know more than most about building software, “but they do not know more about how society should be organized or what justice requires”.
So, a software provider to intelligence agencies boasts about its commitment to privacy. It pitches itself as the builder of tech that combats terrorists and keeps US soldiers safe. And it claims to know “what justice requires”. That’s a big shout.
It also has unusual risk factors. “Our business may be impacted due to shifts in the political environment and changes in the government and agency leadership positions in connection with the 2020 presidential election.”
Definitely a stock to… watch.
