Their services are controversial and their impact is global. Recently, they announced plans for an IPO. The global shadows are where they like to operate – but is an IPO about to blow their cover?
Key terms
Initial Public Offering (IPO): a term used to describe the transition of a company from privately owned to publicly owned.
One of the major hallmarks of Silicon Valley is its ability to attract individuals and companies who like to go-against societal trends and carve out their own destiny, on their own terms. Wearing a tie? Not for them. Long office meetings in formal board rooms? They’ve never heard of it. However, even for Silicon Valley, which gave birth to some of the world’s most innovative and maladjusted companies, Alex Karp and his troops at Palantir might be too hell-bent on standing apart from the crowd.
At their headquarters, everything appears usual for a Silicon Valley tech company: t-shirt wearing engineers, ball pit filled conference rooms and a laid back but ambitious CEO. But unlike other Silicon Valley companies, Palantir’s global business doesn’t involve you selling you the latest iPhone or the best voice-command speakers. Palantir’s line of business – as hard is it to believe given the focused attention of politicians on the big five – is far more controversial.
The company was established in 2003, after the 9/11 terror attacks. Its products and services, which include surveillance software and consulting, are aimed at helping companies and governments utilise the power of data in their decisions and operations.
One of their main areas of focus is national security and intelligence. They assist, amongst others, the US military in its operations. In a polarised country, their work for the government is bound to produce some uncomfortable groans from the public—and investors.
And it’s hard to imagine that the conflicting opinions on the company, its operations and involvement with the US government, would have settled by CEO Alex Karp when he stated in an interview, “our product is used, on occasion, to kill people”.
When asked to clarify whether he meant the use of drones, he said, “targeting of all kinds. If you are looking for a terrorist in the world now, you’re probably using our government product. And you’re probably doing the operation that actually takes out the person in another product we built”.
By his own admission, Karp is aware of the ethical questions facing the company. In an interview with Axios, he said, “I had people protesting me, some of whom I think ask really legitimate questions. I have asked myself if I were younger at college: ‘Would I be protesting me?”.
If you’re a client, you can rest assured knowing that the company will do its best to keep your secrets: Palantir does not disclose what it does for its clients. Apart from government agencies such as the CIA, NSA, Marine Corps and the FBI, the company also provides services to some of the world’s largest and most well-known brands. Eight years ago, JP Morgan used its software in a bid to spot rogue traders, and the company also counts Walmart and BP as its clients. But reportedly, according to Buzzfeed, JP Morgan no longer requires their services.
Perhaps that was because of the increasing amount of negative attention Palantir had been receiving. Of recent, its work for the U.S. Government gained negative attention in a politically polarised country. Its work in helping the US Immigration and Customs Enforcement identify illegal immigrants for deportation became a point of attack for the current US president and the company. The anger of protestors against the administration and the company, on what they saw as the use of technology to commit evil, brought much-unwanted attention. The company’s controversial and outspoken co-founder, Peter Thiel, who publicly supported Trump in 2016, hasn’t done much to help reassure angry sceptics.
But Karp, who remains in control, and has a 29% share of supervoting shares, is focused on growth and increasing the company’s client base.
In the UK, where Palantir was involved in collating health data to fight COVID-19, questions were asked and eyebrows were raised – was Palantir being allowed too much control over sensitive, private and personal data? Some thought so. Palantir recognises that its bad image could hurt its business and the company is making moves to fight it. According to the company, privacy controls and extensive auditing mean that it is fully aware of who has access to what data and what they are using it for.
So what about the numbers?
The company is coming to market amidst a strong year for technology stocks – but with the nature of their work, the market may be hesitant to treat Palantir’s IPO like that of any other tech company.
Recently, the company was valued at $41billion, which might some have investors rubbing their hands— but others are still sceptical over whether their business model works. In less than flattering words, the Wall Street Journal (in 2018) was of the view that the company had “struggled” to meet expectations of its “hot startup image”. In 17 years, the company hasn’t made a profit. The explanation? High project costs – turns out that teams of expert engineers who work on complex and highly customised projects can be very expensive; and when those teams of engineers are sent out to work on projects for long periods, the bill only gets bigger. In response, the company is looking at ways to reduce its costs –automating some work and reducing the amount of time it takes to install its technology are some of the solutions being tried.
In 2020, the company’s figures have seen some improvement. Its revenue rose to $480 million in the first half of the year and its $800 million contract with the US Army (after the company sued the army for trying to ditch its products to build its own), promises to bring in some much-needed revenue.
Regardless of the figures, the company will have to reassure markets of its transparency and trustworthiness if it is to have a successful IPO.
In the court of public opinion, Palantir’s work may resemble that of “God’s Eye” in Fast and Furious 7 – a secretive and controversial company which must be closely monitored.
But in the court of Wall Street, where money is still King, the jury is out.