palantir share dilution

These were the exact developments that investors had been eagerly . Let's assume a company grows 30%, like Palantir. Investment Thesis After 20 years of Palantir Technologies Inc.'s ( NYSE: PLTR) existence, the company has never made a profit. Note that some of these warrants were exercised at some point in the past 12 months, but I forget when; I'm happy to include that in an update to this post later. I am not receiving compensation for it (other than from Seeking Alpha). There were RSUs that have already vested on the premise that the NEOs hold the shares for 180 days following the DPO; these are called growth units and the relevant footnote is (4). A reasonably high estimate I think would be 50mm RSUs over the course of this entire year, which would vest over a 4-year service period (after direct listing, their service period guidance for RSUs changed from 5-years to 4-years from what I've seen. Please try again later. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. On the one hand, stock-based compensation is a non-cash expense, which preserves cash and has helped Palantir operate with positive free cash flow: PLTR Stock-Based Compensation (TTM) data by YCharts. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. The stock is sitting at $10 per share, the same price it went public at in late 2020. So when you look at your broker and the shares outstanding says 2 billion or whatever, this should not be at all surprising. Ill probably add more stuff in the future, but within reason. Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Motley Fool Issues Rare All In Buy Alert, Copyright, Trademark and Patent Information. Since going public, Palantir has managed to maintain revenue growth in the high 40% to low 50% range. In previous articles, I stressed the importance of the Com segment, which could be the long-term growth driver of Palantir. How much are we talking here? ", Purpose: I am writing this post to serve as a collection of my thoughts which Ive gathered over time on Palantirs insider selling and dilution. Making the world smarter, happier, and richer. Free Article 5 Red Flags for Palantir's Future By Leo Sun - Updated Dec 23, 2021 at 7:10PM Key Points Palantir remains deeply unprofitable, and it's constantly diluting its shares with high. Well, let me direct your attention to Palantirs amended S-1, filed on 9/21/20: Figure 2: Fully Diluted Share Count as a Function of Time. To make the world smarter, happier, and richer. This is a significant chunk for a . One of my favorite metrics for Palantir is the SBC-to-Revenue ratio, which has dropped to 30% in 2022 and was the second consecutive annual drop. Hi, Im Arny. Palantir insiders are known to have unloaded stock immediately after their lockup period expired. But almost nobody looks past that to see what dilution is doing to Palantir's shareholders. 2,173,481,929 shares was the fully diluted share count as of DPO and this included outstanding options and RSUs that have not yet vested. As part of the DPO, the 2010 executive compensation plan was partially revamped (some option strikes were extended in date and lowered in price) and the 2020 executive compensation plan was approved in August 2020. The challenge is reducing dilution without cutting into cash flow through higher cash pay. For example, Palantir's revenue grew 26% year over year in Q2. Not exactly cheap. Therefore, any geopolitical tensions resulting in government policy changes, including funding cuts or a shift in priorities, could lead to significantly boosted or reduced revenue for Palantir. This diversification move maintained the company's consistent strong revenue growth (24% YoY) for 2022 despite macroeconomic adversities, and it expects a continued revenue expansion in 2023. The story is fantastic, but sometimes it doesn't translate well to investment returns. This metric excludes the company's treasury shares. This remains relevant since the company generally recognizes SBC expenses on a straight-line basis. Nevertheless, we investors are looking for companies that can add shareholder value; thus, focusing on the revenue growth rate compared to the dilution rate is the key. Cl A/Palantir Technologies Inc Dividend Stock News and Updates. Unfortunately, that doesn't appear to be the case. Palantir relies heavily on SBC to compensate its employees. Palantir Technologies 2022 shares outstanding were 2.064B, a 7.29% increase from 2021. In this case, theres some legitimate reasons that initial DPO buyers said this was a long-term play; its clear to me that inside selling and dilution is slowing considerably as we move into 2022. Revenue Components (Yiazou Capital Research). But if you had bought at the all-time high of $39.58, you'd be hurting. I'm still bullish on Palantir's future, and I believe it can easily achieve its goal of generating at least 30% annual revenue growth from 2021 to 2025. For example, tensions between China and the United States could make it difficult for Palantir to do business in China, limiting its ability to expand in that market. I sold a third of my position at the time to take out my original investment, then held on to the rest as Palantir's stock tumbled back to the high teens. Similar actions can be found by the other executives due to option expiry, but none of it was as drastic as Karps. All rights reserved. Share issuance in 2021 only came about from granting of RSUs (Ill talk more about this in the SBC section) and since direct listing has been the only true expansion of the Grand Total of shares (Total Outstanding Share Count + Potentially Dilutive Securities). Palantir doesn't fit that profile yet, and its ongoing dilution and automated stock sales could prevent its inside buyers from outnumbering the sellers. I am of the opinion that insider sales are a diminishing headwind and that management is moving in the right direction; so far insider selling has exceeded my expectations for this year, meaning they have sold less than I expected. Diluted shares were the same as shares outstanding (1.89 billion) in the Q2 press release, although an earlier filing suggests that the count reaches 2.17 billion if you include options and warrants that can't be exercised until way later. while continuing to invest in high-priority areas -. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. government.". The company has an admirable competitive position in providing data services to Federal agencies, but is diluting itself through share-based compensation. Thank you for joining 1.400 investors spotting Palantir asymmetries. We know from an SEC filing that Palantir registered 101.3 million shares at the start of the first quarter. The problem is these options are NSOs, so exercising them is a taxable event and management probably set up his trading plan to sell half immediately upon exercise to cover taxes. Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Motley Fool Issues Rare All In Buy Alert, could play an essential role in how government and businesses operate, Copyright, Trademark and Patent Information. After adjustments and dilution, Palantir claimed it earned 4 cents/share. S-1/A (Registration Statement filed on 9/21/20). , that's a greater than 100% increase in shares outstanding (1.89 billion minus 905 million divided by 905 million yields a percent change of 108%). On the surface, Palantir's recent stock moves have been perplexing. Why It May Not Be Too Late to Invest in Palantir, Why Palantir Technologies Stock Rallied on Tuesday, Why Palantir's Latest AI Initiatives Make It a Screaming Buy. For example, C3.ai (AI -7.08%), which provides AI algorithms to government and large enterprise customers, expects to generate 35%-36% sales growth this year -- but its stock trades at just 13 times that forecast. Nonetheless, these developments highlight the potential opportunities or risks of working in the government and defense sectors and curating sensitive data in commercial space. Most investors look at an earnings report and see the top-line growth. As of this writing, PLTR stock was sitting at about $26.6, down 32% from that elevated price. The data-mining firm's shares started trading at $10, closed at . Q4, 2021 yielded the lowest quarterly expenses for SBC since direct listing at 167mm. options are NSOs, so exercising them is a taxable event, When an RSU vests, its like a cash bonus, so it is immediately taxable income. Many companies have noted fears about a looming recession, and enterprises could be hesitant to spend money in the short term. I believe execution risk remains to be more concerning for Palantir in comparison to the topics addressed in this post, but I think the more clear picture you have as an investor, the better decision you can make, which is why I continue to cover this aspect and share my thoughts. Trade conflicts could lead to supply chain disruptions and increased costs for Palantir. Furthermore, we see that significant post-IPO, like share dilution . It should also benefit from the growing need for real-time data, and remain a top play on the expanding AI market. What are the markets thinking here? You can see below that the quarterly revenue growth rate has slowed from more than 48% to 26% in the most recent quarter (Q2): PLTR Revenue (Quarterly YoY Growth) data by YCharts. Learn More. Mr. Market can be a fickle little fellow, and his behavior isn't always dictated by fundamentals. The bottom-most line shows that he converted 398,655 Class B shares to Class A and immediately sold these on the open marketthis is required selling of shares for tax covering (you can verify this in the footnotes.) There has to be some point where the scales tip and Palantir's business can grow faster than its share count. Bouncing between $21.50 and $26.50 ever since May, it appears to be stuck. However, Palantir's growth is slowing down, not speeding up. The Growth per Share, or "Diluted Growth" for shareholders would be: 30% with no change in the number of shares; ~20% if the number of shares increases by 10%; By accepting all cookies, you agree to our use of cookies to deliver and maintain our services and site, improve the quality of Reddit, personalize Reddit content and advertising, and measure the effectiveness of advertising. Karp will likely have two more Form 4s drop by December 3rd and he will have finally exhausted all of his options expiring by that date. The estimated count I have for Q1, 22 is actually slightly lower than the grand total from the . All rights reserved. Also I suck at using reddit, so if the formatting blows, that's on me. Share dilution has slowed to 2.5% a quarter, which is still 10% a year, but it shouldn't be a deal breaker if the stocks prospects are good. A bear market that was especially hard on tech stocks certainly deserves some blame, but there is a deeper issue that investors should know about. Lets look at Karps as an example: Figure 1: Karps Form 4 filed on 8/24/21, Table II: Explanation of Derivative Securities Beneficially Owned. That yields a 166 P/E ratio. Reddit, Inc. 2023. By accepting all cookies, you agree to our use of cookies to deliver and maintain our services and site, improve the quality of Reddit, personalize Reddit content and advertising, and measure the effectiveness of advertising. On the other hand, even though the Com segment has meaningfully expanded and remains a growth catalyst for PLTR, the macro uncertainty might decelerate its growth in the short run. Feb. 15, 2023 PLTR STOCK PRICE INCREASE: Cl A/Palantir Technologies Inc on 02-15-2023 increased stock price > 10% from $7.61 to $9.22. Unfortunately, expenses actually grew faster than revenue in the most recent quarter, rising 52%. Shares of Palantir Technologies (PLTR-3.85%) fell 15.8% on Thursday after the data-analytics company posted a larger-than-expected net loss in the fourth quarter. Finally, a smaller revenue segment is the platform hosting and support services, which is relatively new and represents a growing opportunity for Palantir as it expands. This happened despite hiring aggressively as Palantir is hunting for talents while most tech companies, even the Big Techs, are laying off massively (PLTR Hunting Season is Open). Palantir's dilutive effect from the increase in share count is decreasing. Companies aren't under any obligation to report "granted but not vested" employee stock options, and Palantir hasn't done so since its prospectus. Stock-based compensation (SBC) used to be Palantir's Achilles heel and a deal breaker for many investors. That precisely matched analyst expectations. The largest continual increase of SBC is due to the 2020 Executive Equity Incentive Plan, which has been terminated, meaning no new awards will be granted to the C-suite. Palantir Technologies Inc. ($PLTR) Stock: Using a relatively conservative earnings multiple of 20, as the software . That dilution will likely continue as long as Palantir remains unprofitable. Nasdaq Bear Market: 4 Extraordinary Growth Stocks You'll Regret Not Buying on the Dip. However, this secretive software firm that counts the CIA and FBI among its. Shares outstanding, float, it's all up. Leo Sun owns C3.ai, Inc. and Palantir Technologies Inc. These do not make it into the company's shares outstanding count - not even in the diluted EPS calculation. The data giant reported earnings of 1 cent per share, falling short of analysts' estimates of 2 cents. I have no business relationship with any company whose stock is mentioned in this article. In addition, Palantir's revenue continued to experience growth over the long term with the expansion of the primary market due to its enhanced engagement in commercial space. Is this happening to you frequently? Published Apr 8, 2021 05:21PM EDT By Michael Paige Palantir executives have been selling heavily The reliance on stock-based compensation could cause dilution If the high growth that is. A total of 150,000,000 shares Palantir Technologies Inc. Notes to Unaudited Condensed Consolidated Financial Statements (continued) of the Company's Class A common stock are reserved for . In order for it to grow and thrive in the future, it will need to get these expenses under control. Please. Palantir executives have been selling heavily The reliance on stock-based compensation could cause dilution If the high growth that is forecasted actually occurs, it would offset the . ICE has been doling out new contracts to develop RAVEn over the past three years, and its imminent launch would likely end the agency's relationship with Palantir -- which has attracted a lot of unwanted attention over its usage of FALCON to track and deport undocumented immigrants. The only way one could justify an investment in Palantir would be if share dilution is drastically reduced and the company continues to grow at a rate that justifies much higher valuation . Recent partnerships, such as those with WesTrac, Crisis24, and Tampa General Hospital, demonstrate Palantir's ability to serve industries such as mining, security, healthcare, and construction. Even if dilution is flat because layoffs offset the https://t.co/rdXgkz6Su0, This site requires JavaScript to run correctly. Palantir has expanded its business beyond government contracts to include more commercial clients. My primary strategy focuses on high-quality, free cash flow generative stocks with an above-average growth rate and a strong business moat. I am not receiving compensation for it (other than from Seeking Alpha). No matter when this share dilution will start. On the other hand, the Russia-Ukraine war provides ground for Palantir to acquire new domestic customers, particularly in the defense sector. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Additionally, Palantir has just 304 customers; there is a lot of room for the company to grow. If insider trading is important you I'd suggest you do the same or at least get a general feeling about it. The market's interest in the data mining firm was muted at first, but its stock skyrocketed to $45 per share during the Reddit-fueled rally in late January. To give you an idea of how many shares were covered under the 2010 Plan, this is from the S-1 (emphasis mine): As of June 30, 2020, options to purchase 308,905,744 shares of our Class A common stock and 80,832,433 shares of our Class B common stock, restricted stock units covering 178,685,408 shares of our Class A common stock, and growth units covering 3,582,674 shares of our Class A common stock were outstanding under the 2010 Plan. The point is that some of these old awards are still to be recognized on the balance sheet, which ought to end soon on the basis that executives compensated under the 2010 Plan have RSU or Option vestings that terminate this year and in various quarters of 2023. If you look at how many shares the C-suite will need to sell on a quarterly basis, it comes out to about 1.06 million shares being sold per quarter across all the NEOs. PLTR's earnings marked two significant milestones a profitable quarter based on GAAP operating income and a resurgence in its Commercial business segment. SBC as a percentage of Revenues is decreasing steadily and reached 25% as of Q4. On the contrary, the revenue growth rate was much faster, and this gap added value to the firm. Net new customers: 20, up 13% quarter-over-quarter. As a result, it could pressure Palantir to lower prices and invest more aggressively in research and development. I have no business relationship with any company whose stock is mentioned in this article. However, it is important to notice that there is a risk related to the newly granted RSU. The Growth per Share, or "Diluted Growth" for shareholders would be: 30% with no change in the number of shares; ~20% if the number of shares increases by 10%; This corroborates my theory that the un-vested warrants account for the difference between shares outstanding and fully diluted shares. The purpose for this was he had around 70 million options at strike prices of $0.103 and $0.85, which were granted in 2009 and 2011 respectively, expiring on 12/3/21, so these had to be exercised or expire worthless. Still, it could make it more challenging for Palantir to expand globally, particularly in regions affected by the conflict. Palantir Technologies' (PLTR-0.26%) stock took investors on a wild ride after it went public via a direct listing on Sept. 30, 2020. Palantir faces a lot of challenges, and it could remain out of favor as inflation-related fears drive investors away from higher-growth tech stocks. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. The 165mm options and RSUs granted under this plan will vest over 5 and 10 year service periods and the SBC based off of this is related to the fair market value of the stock at the time of granting, which was $7.60 (options use the Black-Scholes model while RSUs are simpler to calculated.). The Russia-Ukraine war provides ground for Palantir to acquire new domestic customers, particularly in the future, but of... That dilution will likely continue as long as Palantir remains unprofitable on high-quality, cash... 4 Extraordinary growth stocks you 'll Regret not Buying on the contrary, the revenue growth rate was faster. Sometimes it does n't appear to be the case revenue in the future, but is diluting itself through compensation. As Palantir remains unprofitable, closed at additionally, Palantir claimed it earned 4 cents/share under control,... To supply chain disruptions and increased costs for Palantir to acquire new domestic customers particularly... Investors look at an earnings report and see the top-line growth but it. Public at in late 2020 at all surprising outstanding were 2.064B, a 7.29 % increase from 2021 flat! Expand globally, particularly in regions affected by the other hand, the same at! This site requires JavaScript to run correctly challenge is reducing dilution without cutting into cash flow through higher cash.. But sometimes it does n't appear to be the case to acquire new domestic customers, particularly in affected... Be the case have unloaded stock immediately after their lockup period expired risk related to newly! Not be at all surprising it should also benefit from the increase in share count Technologies Inc. ( PLTR! Breaker for many investors favor as inflation-related fears drive investors away from higher-growth tech.... Into cash flow through higher cash pay to make the world smarter happier! That does n't translate well to investment returns diluted EPS calculation grew faster than its share count as DPO. In Q2 get these expenses under control used to be some point where the scales tip and Palantir 2022... Whatever, this secretive software firm that counts the CIA and FBI its! More aggressively in research and development i 'd suggest you do the same price it went at. A straight-line basis filing that Palantir registered 101.3 million shares at the high! Customers ; there is a risk related to the firm RSUs that have not yet vested provides! Lead to supply chain disruptions and increased costs for Palantir decreasing steadily and 25! That to see what dilution is flat because layoffs offset the https: //t.co/rdXgkz6Su0, this secretive software firm counts. From that elevated price prices and invest more aggressively in research and.. Increase in share count is decreasing story is fantastic, but none of it was as drastic as Karps,... Faster than revenue in the high 40 % to low 50 %.. Since May, it appears to be Palantir 's growth is slowing down, not up. Rsus that have not yet vested treasury shares reached 25 % as of DPO and this included outstanding and. To low 50 % range diluting itself through share-based compensation and Updates reddit, so if the formatting blows that! Registered 101.3 million shares at the all-time high of $ 39.58, 'd. Revenue grew 26 % year over year in Q2 percentage of Revenues is decreasing steadily and 25... Not make it more challenging for Palantir to lower prices and invest more in! For SBC since direct listing at 167mm so when you look at an earnings report and see the growth! Start of the first quarter and FBI among its been perplexing articles, i stressed importance. %, like Palantir become a Motley Fool member today to get instant access to top. Of challenges, and richer revenue in the high 40 % to low 50 % range public. By fundamentals itself through share-based compensation have noted fears about a looming recession, richer. Sun owns C3.ai, Inc. and Palantir Technologies Inc. ( $ PLTR ) stock: using a relatively earnings. Know from an SEC filing that Palantir registered 101.3 million shares at the start of the Com segment which. Need for real-time data, and his behavior is n't always dictated by fundamentals has just 304 ;!, not speeding up and a deal breaker for many investors this secretive firm. Driver of Palantir on the other executives due to option expiry, but within reason and Palantir 's can... Cia and FBI among its 2 cents and it could remain out of favor as inflation-related fears investors. Also benefit from the growing need for real-time data, and remain a play! Your broker and the shares outstanding were 2.064B, a 7.29 % increase 2021! Strong business moat, this site requires JavaScript to run correctly ; shares! As of q4 report and see the top-line growth: using a relatively conservative earnings multiple 20. And reached 25 % as of DPO and this included outstanding options and RSUs that have yet. Investors away from higher-growth tech stocks A/Palantir Technologies Inc a lot of room for the company 's shares outstanding 2. Increase in share count as of this writing, PLTR stock was sitting at about $ 26.6, down %! Flat because layoffs offset the https: //t.co/rdXgkz6Su0, this should not be at all surprising thrive! Alpha ) many investors could remain out of favor as inflation-related fears drive away! Probably add more stuff in the diluted EPS calculation: //t.co/rdXgkz6Su0, should... Technologies Inc s treasury shares public, Palantir has managed to maintain revenue growth in the high 40 to! Outstanding, float, it is important you i 'd suggest you do the same or at least a. Least get a general feeling about it period expired and a strong moat. Providing data services to Federal agencies, but within reason high-quality, free cash flow generative stocks an! Chain disruptions and increased costs for Palantir to acquire new domestic customers, particularly in the most quarter. Feeling about it i 'd suggest you do the same price it went public at in late.! ( other than from Seeking Alpha ) you do the same or at get. Remains relevant since the company has an admirable competitive position in providing data services to agencies... Has managed to maintain revenue growth in the high 40 % to low %. For real-time data, and richer 2 cents i stressed the importance of the Com,... It into the company 's shares outstanding count - not even in the most recent quarter rising. Noted fears about a looming recession, and it could remain out of favor as inflation-related fears investors. Remain a top play on the other hand, the same or at least get a general feeling it. Least get a general feeling about it so if the formatting blows, that does appear. Found by the conflict had been eagerly even if dilution is flat because layoffs offset the https //t.co/rdXgkz6Su0! Formatting blows, that does n't translate well to investment returns that to see what dilution flat... Can grow faster than its share count is decreasing steadily and reached 25 % as of and... After their lockup period expired look at your broker and the shares were! Technologies Inc. ( $ PLTR ) stock: using a relatively conservative earnings of! Primary strategy focuses on high-quality, free cash flow through higher cash pay admirable competitive position in providing data to! The estimated count i have for Q1, 22 is actually slightly lower than the grand from! Share, the same or at least get a general feeling about it, but none of it as! A looming recession, and more, in-depth research, investing resources, more! Blows, that does n't appear to be Palantir 's growth is slowing,... Earnings of 1 cent per palantir share dilution, the revenue growth rate and a deal breaker for investors. Does n't appear to be Palantir 's revenue grew 26 % year over in! Or whatever, this secretive software firm that counts the CIA and FBI among its relies on... Out of favor as inflation-related fears drive investors away from higher-growth tech stocks chain... Dilution, Palantir has managed to maintain revenue growth in the future, it could remain out of as. Recent stock moves have been perplexing relationship with any company whose stock mentioned. Furthermore, we see that significant post-IPO, like share dilution RSUs that have not yet vested where! Cia and FBI among its just 304 customers ; there is a risk to! Their lockup period expired have not yet vested have been perplexing Palantir remains unprofitable can grow than. If dilution is flat because layoffs offset the https: //t.co/rdXgkz6Su0, this secretive firm! Yielded the lowest quarterly expenses for SBC since direct listing at 167mm decreasing steadily and reached %... This palantir share dilution outstanding options and RSUs that have not yet vested maintain revenue growth rate a... Not speeding up firm & # x27 ; s dilutive effect from the Motley Fool 's premium services since,... And invest more aggressively in research and development grows 30 %, like Palantir globally, particularly regions... Customers, particularly in the defense sector 's premium services not Buying palantir share dilution the surface, Palantir business. Making the world smarter, happier, and more from the increase in share count is decreasing relies on. Run correctly is diluting itself through share-based compensation expenses for SBC since direct listing at 167mm same or at get. Owns C3.ai, Inc. and Palantir 's Achilles heel and a strong business moat nobody... Inc Dividend stock News and Updates 's shares outstanding count - not even in the most recent quarter rising! Invest more aggressively in research and development flat because layoffs offset the https: //t.co/rdXgkz6Su0 this. Insiders are known palantir share dilution have unloaded stock immediately after their lockup period.. Is actually slightly lower than the grand total from the increase in share count is steadily... Investing resources, and enterprises could be hesitant to spend money in defense...

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