
Palantir S-1 - tempsy
https://www.sec.gov/Archives/edgar/data/1321655/000119312520230013/d904406ds1.htm
======
Reedx
The intro (letter from the CEO) is interesting, distancing themselves from
Silicon Valley:

 _" 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.

Our company was founded in Silicon Valley. But we seem to share fewer and
fewer of the technology sector’s values and commitments.

From the start, we have repeatedly turned down opportunities to sell, collect,
or mine data. Other technology companies, including some of the largest in the
world, have built their entire businesses on doing just that.

Software projects with our nation’s defense and intelligence agencies, whose
missions are to keep us safe, have become controversial, while companies built
on advertising dollars are commonplace. For many consumer internet companies,
our thoughts and inclinations, behaviors and browsing habits, are the product
for sale. The slogans and marketing of many of the Valley’s largest technology
firms attempt to obscure this simple fact."_

~~~
ptmcc
Isn't their entire business based on collecting, mining, and selling data to
government intelligence agencies?

~~~
amathyst
It’s not. They don’t have any data of their own. They offer a data integration
platform and then a slate of apps on top of that platform for institutions to
perform analysis on their own data. They do make a few plugins that mine
social media and other “open” sources but have to do a funny ownership dance
so it’s the institution that is breaching the TOS rather than them.

~~~
ptmcc
> a funny ownership dance

Oh well ok then, they don't do any data collection or mining, they just sell
the tools to empower three-letter agencies to do it more effectively.
Conscience is clear then!

~~~
bhupy
Genuinely curious: at what point is it "okay" to create data analysis tools
that might be used by 3-letter agencies?

I imagine that before Palantir came around, the analysts at these agencies did
what most other analysts anywhere do and used Excel to create sophisticated
pivot tables when working on {insert defense operation}.

Where does it stop being okay? To the extent that it even matters, Palantir
appears to at least _own up_ to the fact that they are used by governments.

~~~
sudosysgen
It stops being okay when the analysis tools are built specially for the 3
letter agencies instead of for another socially useful purpose.

~~~
bhupy
Per this S-1 filing, Palantir appears to be used by the private sector as
well.

> socially useful purpose

Who decides what's "socially useful"?

~~~
mrgordon
Their early investors were the CIA. I know the point you’re trying to make but
Palantir isn’t really in the gray when they have been basically a branch of
the spy agencies since the beginning

~~~
bhupy
Sure, but their current operations appear to be more diversified than that ->
[https://www.palantir.com/solutions/](https://www.palantir.com/solutions/).

Even per their S-1, their market sizing shows "Commercial" to be a substantial
proportion of their aspirations:

> Commercial. Our estimate of the TAM in the commercial sector is $56 billion.

> Government. We estimate the TAM in the government sector, including
> government agencies in the United States, its allies, and in other countries
> abroad whose values align with liberal democracies, is $63 billion.

~~~
mrgordon
Well sure they point to a theoretical market that’s big but it isn’t where
their revenue comes from now

> The company’s top three customers — which aren’t disclosed — together
> represented 28% of the company’s revenue for 2019. Its top twenty customers
> represented 67% of total revenues, with each one of those customers
> averaging $24.8 million in revenue.

They admit they count every single government sub-agency as a different
customer (their example is NIH and the CDC would count separately despite the
same parent organization) so the top 25 is basically just governments. There
is incredible revenue concentration there.

~~~
htrp
FYI mrgordon.....

Metropolis got deprecated (read renamed) Foundry because they kept screwing up
their sales and decided a rebrand would be more effective on their commercial
side.

[https://www.quora.com/What-are-the-main-differences-
between-...](https://www.quora.com/What-are-the-main-differences-between-the-
Palantir-Metropolis-and-Gotham-platforms)

per someone who runs tech on the commercial side,

Foundry started as our attempt to create scalable process and rigor around
data integration. There's a longer story to tell here, but the short version
is that we started out with off-the-shelf orchestration systems for running
jobs on a schedule (think Jenkins and Rundeck — things that were more robust
than cron). At some level, that worked, and we had to figure out how to scale
it, leading to a combination of HDFS, Rundeck/Jenkins, a git repo, and a
common language for mutating data.

~~~
mrgordon
Great info

------
throwawaycow
These financials are awful for a software business. Gross margin of 67%, even
with pilot costs lumped into Sales&Marketing. If you add these pilot costs to
COR, you'd get better numbers manufacturing furniture.

\-- 2019 Financials ('000s)

Revenue: 742,555

Cost of Revenue: 242,373

Gross Profit: 500,182

Sales and Marketing: 450,120

\-- Sales and Marketing includes pilot costs

"Sales and marketing costs primarily include salaries, stock-based
compensation expense, and benefits for personnel involved in executing on
pilots and performing other brand building activities, as well as third-party
cloud hosting services for our pilots, marketing and sales event-related
costs, and allocated overhead. The Company generally charges all such costs to
sales and marketing expense in the period incurred."

~~~
mbesto
> These financials are awful for a software business.

That's cuz they're not. They are a hybrid services business that also sells
"cloud computing". The are very comparable to Cloudera - they have a
proprietary analytics platform that they then customize specifically for the
workload. They then charge an implementation fees, on-going "maintenance", and
a subscription fee for the "software" (which is basically a highly customized
single tenant).

> Gross margin of 67%

Which is still better than IBM or any professional services firm could ever
achieve from the government.

> If you add these pilot costs to COR, you'd get better numbers manufacturing
> furniture.

If you added S&M costs to revenue attributed to a multi-year subscription fee,
you'd be called an idiot. Hence why they are probably not in there (could be
wrong...we don't know for sure).

I do not like Palantir in the slightest, but this assessment is kinda off.

~~~
stu2b50
Their private valuation is more SaaS like, though. Revenue of 724 million,
last private valuation of 20 billion, which is a 26x revenue multiplier.

IBM, on the other hand, has a 2x revenue multiplier.

Maybe this isn't the best metric to use, and Palantir does have better
margins, but I just can't see these numbers being worth their current
valuation as a services business.

~~~
mbesto
> Maybe this isn't the best metric to use

You're right. Discounted Cash Flow is.

------
joshe
It will be interesting to see how many of these IPOing company employees move
this year and next to avoid CA capital gains tax. (Asana, Airbnb, Doordash,
Lemonade are others).

California taxes capital gains at 13%, and 9 states have none (Alaska,
Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington,
and Wyoming). As an employee, you could save $130,000 on your $1 million
dollar gain.

That pays for an awesome rental house in Seattle or the Nevada side of Lake
Tahoe. It will be a lot more tempting since you can just ride out covid for a
year or so and keep working remotely like you are now. You can time this to
your liking since the trigger is you selling the stock, so you can move in
2021 and sell in 2022. Realistically having 1 successful IPO is very lucky,
maximizing the return makes a lot of sense.

And I think this is much a much sharper decision than for public company
employees. You will have been accumulating stock for 4-10 years and it's been
completely illiquid. You get this big hammer of a tax bill when you sell, and
it's very tempting to optimize it. This is always happened a little but in
covid times, it seems like it will be 10x of the usual. Expect a lot of
complaints from Seattle and Austin :-).

~~~
philsnow
> It will be interesting to see how many of these IPOing company employees
> move this year and next to _attempt to_ avoid CA capital gains tax.

(added _attempt to_ )

If you worked in California while you were earning that stock / options,
they'll come after you for the taxes.

California knows. They know that people want to try and have tried to dodge
these taxes. They will find you and get their pound of flesh.

~~~
mrgordon
If your stock options were exercised, you now are a shareholder and you pay
taxes in the state of residence at the time of sale. If you don’t live in
California (for real) then they aren’t going to be able to tax you on the
sale.

RSUs with a double trigger on IPO will still be taxed on vesting as if you
were in CA.

------
abuckenheimer
It's interesting to compare palantir's risk factor on open source vs
pivotals[1]. Palantir takes a defensive posture saying basically that their
ability to not contribute to open source without running afoul their licenses
is important:

 _Our platforms contain “open source” software, and any failure to comply with
the terms of one or more of these open source licenses could negatively affect
our business._

Where as pivotal says that being an active part of a vibrant open source
community is crucial:

 _If open-source software programmers, many of whom we do not employ, or our
own internal programmers do not continue to use, contribute to and enhance the
open-source technologies that we rely on, the market appeal of our offering
may be reduced, which could harm our reputation, diminish our brand and result
in decreased revenue._

Like this makes sense, palantir is a closed source first kinda company and
obviously a different value to its customers than pivotal. Kinda interesting
to see that manifestation in the risk factors though.

[1]
[https://www.sec.gov/Archives/edgar/data/1574135/000104746918...](https://www.sec.gov/Archives/edgar/data/1574135/000104746918002061/a2234898zs-1.htm)

~~~
legerdemain
Here is Palantir's Github presence, with almost 200 open-source projects:
[https://github.com/palantir](https://github.com/palantir)

------
refurb
The CEO's salary is nothing to sneeze at:

\- $2.2M in salary ($225k base + "stipend" \+ "parental benefit" \+ "salary
adjustment")

\- Bonus of $21k (?)

\- $2.5M in stock

\- $11.3M in options

\- $25k in "other compensation)

All total $16M.

The COO got $26M.

This is all "compensation paid for the year ended Dec 31, 2019".

~~~
secabeen
Ooh, can every employee with kids get a "parental benefit"? That seems like a
good policy.

~~~
refurb
It does say "in accordance with our standard parental benefits policy", but I
have no idea if that's standard for executives or standard for every employee.

------
taurath
Looks like they’re trying to capitalize on the COVID bump. Only 250 customers?
They’re at the mercy of probably 5 of them.

~~~
tyre
From a TechCrunch piece[0] a few days ago based on leaked financials:

> The company’s top three customers — which aren’t disclosed — together
> represented 28% of the company’s revenue for 2019. Its top twenty customers
> represented 67% of total revenues, with each one of those customers
> averaging $24.8 million in revenue.

[0]: [https://techcrunch.com/2020/08/21/leaked-
palantir-s-1-shows-...](https://techcrunch.com/2020/08/21/leaked-
palantir-s-1-shows-company-has-125-customers-after-17-years/)

~~~
vasco
This probably assumes customers as the DoD as one single entity, when in fact
they probably have dozens of individual contracts from different sub
departments and with different timelines. Which makes it very different from
the typical SaaS where the top costumer can just unsubscribe.

~~~
tyre
They count them each separately.

> Palantir notes that customers from different parts of the same government
> department or company are considered separately (Palantir’s example is that
> the CDC and NIH are both part of the Department of Health and Human
> Services, but would be billed separately and are thus considered separate
> customers for the purpose of its calculation).

------
thesausageking
Can anyone explain how the voting structure works?

There's a "class F" of shares which are held only by Alex Karp, Stephen Cohen,
and Peter Thiel, with each owning 1/3\. Class F has "voting power representing
up to approximately 49.999999%".

Does that mean that basically Karp, Cohen, and Thiel have full voting control?

~~~
_eigenfoo
Yes. They're pretty explicit about this:

> So long as our Founders [...] meet a minimum ownership threshold on the
> applicable record date for a vote of the stockholders[...], these Founders
> will effectively control all matters submitted to a vote of the stockholders
> for the foreseeable future. This could delay, defer, or prevent a change of
> control, merger, consolidation, or sale of all or substantially all of our
> assets that our other stockholders support. Conversely, this concentrated
> control could allow our Founders to consummate a transaction that our other
> stockholders do not support.

~~~
thesausageking
Thanks! I know many companies get away with it, but I still find it odd for
shareholders to not have any control. They'll own it but have no say in how
the company is run.

~~~
wmf
Most investors are passive anyway. If you don't like how the company is run
you can push down the price by selling.

------
filleokus
OT but: If this wave of (interesting to HN) IPO filings continue, someone
ought to create something to make these documents a bit more readable.

Some snazzy CSS selectors + js magic + pdf.js something something perhaps?
Because SEC doesn't provide nice PDF's, right? I haven't found anything at
least.

~~~
scott31
Tbh entire S-1 file should be a json document with some defined schema (or XML
if you are into retro computing)

~~~
nv-vn
I know for earnings reports the SEC uploads XBRL documents to EDGAR. Weird
that they don't do the same for S-1s.

~~~
filleokus
Apparently that's voluntary for IPO S-1s [0]:

> Financial statements in XBRL also are required as exhibits to Securities Act
> registration statements that contain financial statements, such as Form S-1
> (except registration statements filed in connection with an initial public
> offering).

And by the looks of the search result pages for Apple [1] and Palantir [2], it
looks like they haven't filed it that way (the "Interactive Data" label is
missing):

[0]:
[https://www.sec.gov/rules/final/2018/33-10514.pdf](https://www.sec.gov/rules/final/2018/33-10514.pdf)
[1]: [https://www.sec.gov/cgi-bin/browse-
edgar?action=getcompany&C...](https://www.sec.gov/cgi-bin/browse-
edgar?action=getcompany&CIK=0000320193&owner=exclude&count=40&hidefilings=0)
[2]: [https://www.sec.gov/cgi-bin/browse-
edgar?action=getcompany&C...](https://www.sec.gov/cgi-bin/browse-
edgar?action=getcompany&CIK=0001321655&owner=exclude&count=40&hidefilings=0)

------
nemo44x
I think they will be a good investment. The way the wind is blowing, people
will demand a more “hands-off” approach to day to day policing. We will still
demand safety in our schools, streets, and public spaces. It can be sold in
such a way that we are “saving lives” by using tax revenues to stop putting so
many cops on the streets and instead using surveillance tech and automation to
bring people to justice.

I’m not saying I want this. But in my eyes it is the inevitable next step to
prevent law enforcement events that end in death while still being able to
stop criminal activity sometimes before it happens.

Tech eats the world and old methods of policing are ripe for disruption.

------
boardwaalk
Slightly OT, but I'd love to have a "tweakable" mutual fund. I'd love to cut
out companies like Palantir and Facebook and sectors like O&G from my
primarily index-based portfolio. Without being stuck with other people's
decisions (and high ER) in an ESG fund or managing a whole bunch of individual
stocks.

I suppose there must be a reason why we don't.

~~~
pb7
Complexity. Indexes are easy to manage.

You could short them to the same weighted percentage that they exist in the
index but that's of course not completely simple and you have to pay fees for
the shorted stock. If O&G had a convenient ETF (I don't know if there is or
not, I imagine there is), you could short that rather than individual
companies.

Shorting Facebook would be... interesting for your returns.

~~~
huac
People want ESG, but turns out they want returns too.

------
codereflection
My employer was a customer of theirs for a few years. Horrible service, our
support pushed down in favor of their government contracts, etc. Grapevine
says that they do some pretty shady stuff for the gov as well.

------
ThA0x2
Can someone please tell me how this makes Palantir look bad so I can go virtue
signal to my coworkers about how much they're failing?

------
etc-hosts
I enjoyed listening to [https://player.fm/series/this-machine-kills/ep-5-the-
palanti...](https://player.fm/series/this-machine-kills/ep-5-the-palantir-
reformation)

------
koverda
Definitely seems like these companies are trying to cash in before the coming
crash.

~~~
HenryKissinger
2022: "Taking Palantir private for $420 a share. Funding secured."

------
skosuri
Class F stock has a variable number of votes? Is that a standard way to keep
control amongst the founders?

~~~
stu2b50
No, it's pretty novel. The big 3 perpetually have 49.9% voting rights.

------
chromedev
With all these companies going public it is obvious they are planning for a
crash after the election

~~~
howmayiannoyyou
This shouldn't have been downvoted and here is why: there is a mad dash for
liquidity by corporations who expect to have cash problems Q42020 through ??.
You're seeing it in S1's, credit-line drawdowns and bond issuance.

An infrastructure bill _was_ badly needed in Q2/Q3 to have impact in time. As
it stands now it will hit too late and another round of USGOB aid will be
needed by companies small and large. This will happen regardless the extent of
fall and winter quarantine needs.

The inability of Congress and the White House to put politics aside is going
to cost American workers and companies dearly. It will not have been worth the
political gains either side expects.

There was never a time in this Country's history that bipartisanship was this
needed, at least since WWII. The failure defies words because even in less
critical times names like Baker, Johnson, Dole, Rayburn, O'Neill, Rostenkowski
and others - some corrupt - put self-interest aside briefly to conduct the
country's business.

We are to blame by the way. The HN community is comprised of many bright,
successful and/or wise folks from all political spectrums. We're either caught
in the partisanship, or we're silent and checked out.

------
htrp
They are a tech consulting company masquerading as a startup. The platforms
don't exactly work without a shit ton of Forward Deployed Engineers trying
desperately to make their platforms work with their client's tech systems.

------
gandutraveler
"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."

Wait, what did they do or know about organizing society ?

------
alex_young
Holy cow. They lost a net of $579M last year.

~~~
tyre
What's truly incredible is how much is spent on Sales/Marketing. It's not like
they're marketing to millions of small businesses or hundreds of millions of
consumers.

They have 125 customers. Even assuming everey single one of them came online
last year, we're looking at millions of dollars each?

That's a lot of…bribes? Idk even know what could cost that much.

~~~
Smaug123
I read about some company recently (unsure whether it was Palantir - in fact
Improbable is ringing more of a bell) that they put a huge amount of
engineering effort into proofs-of-concept for many potential customers.
Effectively half-solving every potential customer's problems could plausibly
consume such a huge budget and could plausibly be labelled "sales and
marketing".

~~~
ManBlanket
The company I work at follows that queue. Engineering might not build anything
custom for new clients, since it's a software platform product, but Sales
Engineers invest heavily into building turn-key solutions to their clients'
problems using our platform. I just finished a project allowing our own sales
people to duplicate their efforts into the actual system once the customer is
converted and they estimated that simple copy operation would save them 500
hours a quarter. That's a ton of investment for a company of my employer's
size. If we're talking about a company like Plantir, whose primary engineering
workforce is, "Implementations Consultants", then that absolutely makes sense.
Especially since those are government contracts, which can attach strings to
the proposal requiring proof the bidder is capable of doing what they promise.

------
HenryKissinger
Not a lawyer. What % of the body of text for a S-1 is standardized and copy
pasted from a template? Just curious.

~~~
throwawaycow
Similar structure usually, here's a few others by Wilson Sonsini:

\- Palantir:
[https://www.sec.gov/Archives/edgar/data/1321655/000119312520...](https://www.sec.gov/Archives/edgar/data/1321655/000119312520230013/d904406ds1.htm)

\- Cloudflare:
[https://www.sec.gov/Archives/edgar/data/1477333/000119312519...](https://www.sec.gov/Archives/edgar/data/1477333/000119312519222176/d735023ds1.htm)

\- Zoom:
[https://www.sec.gov/Archives/edgar/data/1585521/000119312519...](https://www.sec.gov/Archives/edgar/data/1585521/000119312519099813/d642624ds1a.htm)

~~~
hrpnk
The statements on never having paid and not intending to pay dividends is
definitely a copy-paste :) I find the links in the summary to be valuable to
check: letter from founders, use of proceeds, executive compensation, and
summary with revenue&profit numbers. The CureVac S-1 [1] had lots of
interesting details on the unique technology, methods, approach and early
results, etc.

[1]
[https://www.sec.gov/Archives/edgar/data/1809122/000110465920...](https://www.sec.gov/Archives/edgar/data/1809122/000110465920086354/tm2016252-11_f1.htm)

------
supernova87a
The important thing to realize is that they're a services company, not a
software company. A services company that has lots of people who use software
to deliver (somewhat) useful conclusions from data.

I don't think they'll ever be "stamping out software" with its associated
margins like a SaaS or traditional software company.

------
herpderperator
This might be a stupid question, but how long does it take to write an S-1
prospectus, and how many people are generally involved? They are always so
long and with tiny font!

~~~
nv-vn
I'd guess that a lot of the delay comes from auditing and then getting someone
at the SEC to actually read your filing before publishing it. In terms of how
many people are involved, this might help give you an idea: "We have engaged
Morgan Stanley & Co. LLC (“Morgan Stanley”), Credit Suisse Securities (USA)
LLC, Goldman Sachs & Co. LLC, Allen & Company LLC, RBC Capital Markets, LLC,
Citigroup Global Markets Inc., Jefferies LLC, HSBC Securities (USA), Inc., SG
Americas Securities, LLC, CIBC World Markets Corp., Scotia Capital (USA) Inc.,
and MUFG Securities Americas Inc. as our financial advisors."

------
marricks
I don't remember _ever_ seeing this many S-1 listings on HN. Are they just a
new thing? Did I miss them before? Is there something large happening in the
market?

EDIT:

\- If this first ddg result is to be believed there are 20% more IPOs than
last year
[https://stockanalysis.com/ipos/2020-list/](https://stockanalysis.com/ipos/2020-list/)

\- There's actually a thread on this, so perhaps downvote this and
read/comment/speculate there
[https://news.ycombinator.com/item?id=24265456](https://news.ycombinator.com/item?id=24265456)

~~~
vosper
I've seen a theory that companies are trying to get IPO'd now, in anticipation
of a weaker market in the future.

I think this theory tends to be based on the idea that the current state of
the stock market does not reflect reality for many businesses (and the economy
as a whole), nor their future prospects, and that a correction is imminent.

Obviously this is speculation, but it's interesting because someone probably
does know - there's probably some overlap in the advisory banks for these
IPOs, and they must have some idea of the thinking of the executive teams of
these companies.

~~~
ndm000
My thoughts exactly. I wonder if businesses are looking for or needing
funding, and the stock market is the one place that looks fine.

