The secretive data mining unicorn of the Silicon Valley, Palantir Technologies, is expecting to finally rank in profitability at the end of this year and it’s highly possible that it’s hinging its bets on a highly expected IPO, also expected to happen later this year, according to a report published in February by Bloomberg.
Currently valued at $20 billion, Palantir has nearly tripled its revenue from the European region but is still floundering on the profitability front, just like other similar stratospherically valued Silicon Valley startups like Snapchat and Uber. Although the CEO of Palantir has said that he is opposed to the idea of going public philosophically, but that his firm is now in a position that could definitely allow them to go public.
Palantir is not an exception when it comes to the point where a highly valued Silicon Valley startup is pushed into going public. Extremely popular tech brands like Snapchat and much less known ones like Okta have filed their IPOs despite generating maximum amounts of venture capital in their initial years, making the Wall Street poised to get its best year as far as Silicon Valley unicorn IPOs are concerned since the dot-com bubble. But why is this phenomenon suddenly gaining momentum with secretive firms like Palantir vying for an IPO despite the fact that they will lose a lot of control over what company data and figure need to be shared and being open to much more public accountability?
The answer lies in the stark difference that their valuations and losses present. Snapchat is valued at a whopping $24.5 billion but it still raked in losses amounting to $515 million in 2016. Cash-strapped and not being able to foretell as to how much time it will take before they finally turn profitable has made the investor groups anxious because when they go out to sell their stakes at the stratospheric market valuations, few buyers emerge.
Not a lot of investors are willing to lose money on such a consistent and high multiple as the Unicorn make them bear, so they start pushing and clamoring for going public so that they can gain access to real, hard public cash and make those on paper tantalizing valuations turn around some value for them and their investments.
In the past, Tech founders had a lot of reasons not to go for an IPO, as the money just kept on coming from a wide variety of streams like hedge funds and independent wealth funds, helping them stay afloat, while going for an IPO represented the dangers of handing over the stakes of their immensely powerful technology to trading bots and Wall street corporate men who would make the firm’s stock lose or gain value at every single step or misstep.
But as the scenario changes and despite the huge interest and make believe valuations, these unicorns failed to generate profitability, IPO seemed like an only option to salvage some much-needed cash to keep the business up and running.
What Palantir Technologies actually does is not known very widely, due to highly secretive nature of their business which involves various aspects of data mining and cooperating with various intelligence agencies, an IPO could change all of that and probably be something that the founders may not be comfortable with. But considering the losses and the failure that employees and co-investors have been facing in the aim of selling their shares, an IPO is more or less likely on the cards to be announced anytime soon in 2017.
And Palantir would not be the only one lining up at the Wall Street as similar unicorns like Blue Apron, Dropbox and Spotify are also making their efforts to have access to some public cash, finally giving way to the idea of embracing the Wall Street and making the Silicon Valley a little less populated with Unicorns.