Palantir Technologies Inc. PLTR 40.34% stock opened at $10 in its trading debut on the New York Stock Exchange, dealing the data firm a valuation of roughly $22 billion as it became the latest technology company to try its hand at a direct listing.
The stock recently traded at $10.70, higher than the $7.31 and $9.17 average prices where the stock changed hands in private trades in August and September, respectively. At its recent trading level, it is 48% above the reference price of $7.25 a share, a guidepost that is set by the NYSE where no money changes hands.
The few direct listings that have happened to date have all traded above their reference prices on the first day.
The Wall Street Journal reported last week that Palantir’s bankers had told investors the stock could start trading around $10.
The data-mining software company became the fourth notable firm to use the direct listing model. Asana Inc. ASAN 33.00% also went public through a direct listing earlier Wednesday, with its stock trading higher in its debut. Only two other major companies— Spotify Technology SA and Slack Technologies Inc. —had ever completed direct listings before Wednesday.
Doing a direct listing skirts investment-banking underwriters, allowing companies to save millions of dollars in fees. It also means the companies don’t raise money for themselves. Instead, employees and early investors are typically able to cash out stock on the first day of trading as shares simply list on the exchange and advisers match buyers and sellers.
Both Asana and Palantir enlisted Citadel Securities as their designated market maker and Morgan Stanley as their lead financial adviser for their debuts.
Strong debuts for the two listings are the latest sign of strength in the IPO market as companies are rushing to go public and investors are especially hungry for technology listings. U.S.-listed IPOs have raised more than $98 billion this year through Tuesday, according to data provider Dealogic.
That surpasses the amount raised in every full year of listings since the tech boom of 1999 and 2000. If this pace continues, bankers, lawyers and executives say they anticipate the IPO market to even beat those years when measured by amount of money raised.
“September will close out to be the busiest month in the history of NYSE when it comes to new listings,” said John Tuttle, vice chairman and chief commercial officer who oversees global listings at the NYSE, referring to the number of new listings this month. “Even through the highs and lows [of 2020], capital markets have remained open for companies and investors.”
The strong investor interest in Palantir comes even as its founders have put in place one of the most aggressive governance structures ever seen.
NYSE President Stacey Cunningham celebrated Asana’s first day of trading Wednesday.
Photo: nicole pereira/nyse/handout/Shutterstock
Tuesday’s dueling direct listings were a balancing act for the NYSE, which had never dealt with opening two on the same day. Given the relatively untested nature of direct listings and their complexities, some people close to the Palantir and Asana offerings had told the Journal they weren’t thrilled that two were happening on the same day.
Both Slack and Spotify’s direct listings went fairly smoothly, with the two companies closing 49% and 13% higher than their respective reference prices on their first trading day.
Since then, the trading success of the two companies has diverged. Slack closed Tuesday at $26.97, 30% below where it closed on its first day of trading last year. Shares of Spotify, meanwhile, had mostly languished below their first-day closing price of $149.01 in 2018 until they shot higher this year. They closed Tuesday at $242.45, up 63% from the first-day close.
Like many other tech companies that go public, Palantir has never made a profit. For 2019, it posted a loss of $579.6 million, roughly even with 2018. The first half of 2020 showed improvement, with a $164 million loss compared with a $274 million deficit in the same period in 2019.
The shares of Palantir’s three co-founders—billionaire investor Peter Thiel, Chief Executive Alex Karp and President Stephen Cohen—are structured so they could become more potent as the men sell down their stakes, according to securities filings. Through a unique feature of the voting structure, Mr. Cohen, for example, could still effectively control the company by owning a tiny fraction of the shares.
The structure of a direct listing typically allows existing shareholders and employees to sell most or all of their shares immediately rather than wait for the mandated lockup of 180 days in most traditional IPOs. Palantir is taking steps to limit the supply of stock on the market by only allowing existing holders to sell 20% of their shares until early next year. That scarcity could serve to bolster the stock price.
Meanwhile, Asana, a maker of workplace tools for productivity and communication, also had a strong debut. Its shares recently traded at $28.46, which is 36% above its reference price of $21. The company is run by Chief Executive Dustin Moskovitz, one of the co-founders and the first chief technology officer of Facebook Inc.
Write to Corrie Driebusch at corrie.driebusch@wsj.com and Maureen Farrell at maureen.farrell@wsj.com
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