On the last day of the busiest month on record on the New York Stock Exchange for IPOs, two tech companies take a different approach to going public
Software companies Palantir and Asana launch direct listings on Wednesday, allowing existing shareholders to sell shares to new investors rather than raising funds through a traditional share sale
It’s not the only thing they have in common The two companies were born in the San Francisco Bay Area and funded by billionaires who made their fortunes from their early involvement in Facebook.
Palantir was co-founded in 2003 by venture capitalist and former PayPal CEO Peter Thiel, who turned a $ 500,000 investment in Facebook into a social media stake worth around $ 1 billion. of dollars He is still on the Facebook forum, although he has sold all of his stock
Asana CEO and co-founder Dustin Moskovitz was the roommate of Facebook CEO Mark Zuckerberg at Harvard As a co-founder of Facebook, he held a 7% stake before the introduction in 2012 scholarship He left Facebook in 2008 to create Asana, which sells cloud-based software for group project tracking
That’s not all Thiel’s venture capital firm, Founders Fund, has been an Asana investor since 2012 and has a 6% stake of 5%
Thiel has a net worth of just over $ 2 billion and, through his various investment groups, controls shares of Palantir valued at around $ 2.4 billion, based on a share price of $ 7.25
Moskovitz’s net worth is just over $ 15 billion including his current Facebook holdings valued at over $ 8 billion He owns $ 1.1 billion of Asana shares assuming a price of $ 21
These stock values for Palantir and Asana are based on benchmark prices provided by the New York Stock Exchange on Tuesday and do not necessarily reflect where the shares will open Palantir has traded up to $ 11.50 in the private market in August, while Asana shares hit $ 28 that month, according to their prospectuses
Unlike tech IPOs, which typically generate significant pop for new investors, the opening price of a direct listing is determined by the market maker and the issuing company based on actual demand. Because shareholders can decide at what price they are willing to sell, there is no inherent discount for new buyers
Direct listings are often seen as a more efficient way to go public than IPOs because companies don’t leave money on the table But there are downsides Currently there is no way for them companies to raise primary capital via direct listing And since this is an open market, management teams cannot decide who gets the allocation and cannot build a list of top investors, so who can help bring credibility to the table and attract other long-term investors
When trying to figure out how to value the two companies, investors have a lot more information on Palantir than on Asana
The stock has been widely owned by major public market investors for years and has been marked up and down in their books depending on growth, profit expectations and economic conditions
“Palantir has had a fairly active market for the action with market-based prices for years,” said Kelly Rodriques, CEO of pre-IPO Forge « It’s been down, up, down and up »
Palantir’s software is used by government agencies and large corporations to collect, analyze, and map large datasets The Defense Department announced on Tuesday that it had awarded Palantir a $ 91 2 million contract euros for the research and development of the Army Research Lab over the next two years The company said last week that this year’s revenue would increase 42% to $ 1.06 billion and that it will have a adjusted earnings, excluding stock-based compensation costs, of $ 121 million
But while its average customer spends over $ 5 million a year, Palantir only has 125 customers, causing software investors to worry about its appeal. Palantir presents a history of expanding software margins that comes in making the technology easier and more widely deployable
Asana’s trading volume was much lower than Palantir While with 660,000 to 177 million Palantir shares traded each month between April 2019 and August 2020, Asana’s volume ranged from 2,000 shares to around 683,000 actions per month between February and August 2020
Last October, Asana conducted a takeover bid, allowing existing holders to sell 46 million shares at $ 15.82 each to large investors
“When I look at Palantir and Asana, they couldn’t be more different,” Rodriques said “Asana has had a lot fewer trades, and the side trades that have occurred have been largely buyouts”
Asana is also much smaller, generating first-half revenue of $ 997 million, but its growth rate of 62% was higher than Palantir’s and its gross margin of 87% was higher than Palantir’s margin of 72%. %
Both companies will go public on the last day of the third quarter, which is expected to be the close of the IPO window
There are a lot of things that could go wrong US stocks end their first month down since March, driven by a drop in tech companies, which were the biggest outperformers of the year. of electoral uncertainty, the economy remains troubled by the coronavirus and there is no guarantee that Congress will be able to pass another stimulus bill to relieve those who have lost their jobs
Roger McNamee, who was an early investor in Facebook before becoming one of its most vocal critics, said the companies are adept at going public while they can because of all potential headwinds
“The economy has been in decline for almost a year and yet, until very recently, the market continued to reach new highs,” said McNamee, co-founder of private equity firm Elevation Partners and author of the 2019 book « Zucked, » which criticized Facebook’s effects on society
« These guys are very smart about taking advantage of these market levels to market themselves, because there may be a time in the not too distant future when it will be really hard to do that »
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World news – US – Billions of Facebook support two direct tech listings Wednesday: Palantir and Asana
