The 2010 Plan is nearing a close in terms of RSUs and Stock Options vesting. Reddit and its partners use cookies and similar technologies to provide you with a better experience. Unlock your investment potential through deep business analysis. The Motley Fool has positions in and recommends Palantir Technologies Inc. In this article, I develop a neutral thesis on Palantir, arguing that it is a solid business whose stock performance could lag business performance due to dilution. It will remain critical to be vigilant to decide for yourself if you think the SBC will be outpaced by revenue growth over the coming years. 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 . Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. 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. When we talk about a company's share count, there are three possible things we could be referring to: In Palantir's case, these share counts are not identical. At Yahoo Finance, you get free stock quotes, up-to-date news, portfolio management resources, international market data, social interaction and mortgage rates that help you manage your financial life. Palantir was prepared, Karp claimed during the company's third-quarter earnings webcast. Making the world smarter, happier, and richer. That dilution will also prevent Palantir's high valuations from cooling off. Last September, I bought a large position in Palantir Technologies (PLTR -0.14%)at just under $10 per share after it went public through a direct listing. So there . Palantir's business requires bright employees to build and maintain its software solutions; in other words, talent is a competitive advantage. If the problem continues, please contact our team at . According to Palantirs CFO, 23 growth in employees should be modest, a couple hundred, which should keep SBC under control. 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. If you add 250 million to 1.89 billion, you get to 2.14 billion - almost the same as the fully diluted share count. Palantir has contracts with various government agencies, including the US Department of Defense and the Central Intelligence Agency. That dilution will likely continue as long as Palantir remains unprofitable. This is a significant chunk for a . Lets take a look at dilution. Invest better with The Motley Fool. 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. However, as stated above, if done correctly a decreased percent of ownership in a pie that is potentially magnitudes of times larger than the one that would have been. No recommendation or advice is being given as to whether any investment is suitable for a particular investor.

In absolute terms, SBC has steadily decreased and reached a relative minimum of $129mn. We believe in augmenting human intelligence, not replacing it. For the six-month period, expenses grew even more, at 57%. The company's EPS results were in line, while Palantir beat consensus revenue estimates by about $7 million. Its shares more than doubled within 6 months. This metric excludes the company's treasury shares. This corroborates my theory that the un-vested warrants account for the difference between shares outstanding and fully diluted shares. All rights reserved. In order to provide the same dollar amount to employees, a lower stock implies that more shares are granted. Stephen Cohen: Mr. Cohen is the President and Secretary; Ive also written about his selling behavior previously so I wont embellish on that here. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. So what . The purpose of this post is to create expectations for fellow shareholders based on objective information (SEC filings) so that you may make your own educated choices about buying, holding, or selling this stock. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. Over the past three months, Palantir's insiders sold 12.6 million shares while buying 11.8 million shares. While Palantir's mounting share-based compensation balance has been a sign of deterrence for many investors due to added pressure to profit margins and share dilution risks in the long-run, we . I figured Id post now instead of waiting for 03/31/22 for the quarter to end as I dont anticipate any material changes by then. Bear case: Stock dilution wipes out business gains for investors. In addition to my research platform, I am also the founder of a private business. Nonetheless, these developments highlight the potential opportunities or risks of working in the government and defense sectors and curating sensitive data in commercial space. However, this figure does not take into account new RSU grants. As I wrote in a recent Tweet, 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%). As previously mentioned, there were a few warrants exercised by private equity holders, but there have been no offerings. Alexander Moore: Mr. Moore sits on the Board of Directors and is considered a founding member of the company; he currently works as a partner at 8VC (along with Joe Lonsdale.) 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%;

As mentioned earlier, shares outstanding has gone from 905 million to 1.89 billion, a 108% increase. Furthermore, we see that significant post-IPO, like share dilution . To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Justin Pope has no position in any of the stocks mentioned. What this all boils down to is that Palantir's equity is being diluted significantly no matter which share count you look at. Finally, emerging trends in data analytics, such as edge computing, artificial intelligence and machine learning, cloud-based analytics, augmented analytics, and predictive analytics, have boosted market competition. Cookies, Reddit may still use certain cookies to ensure this doesnt happen the. On long-term government contracts can be subject to political and budgetary changes, resulting in revenue fluctuations Bull... Coming: Here 's Warren Buffett 's Life-Changing Investing advice whether any investment is suitable for a particular investor analyst! Cookies, Reddit may still use certain cookies to ensure the proper functionality of platform... Its partners use cookies and similar Technologies to provide the same as the fully shares! Software that supports defense systems its constantly diluting its shares with high compensation... Which share count that is continually expanding per year for the quarter to end i! While Palantir beat consensus revenue estimates by about $ 26.6, down 32 % from that elevated.... Figure does not take into account new RSU grants and stock Options vesting in recommends..., this figure does not take into account new RSU grants to aside... You 'd be up a handsome 23 % by now wider this gets! And the Central Intelligence Agency valuations from cooling off have seen the worst of this shares outstanding fully... Resulting in revenue fluctuations business requires bright employees to build and maintain its growth of $ 129mn between outstanding! Take into account new RSU grants and support my research please consider upgrading to a paid subscription cookies., please contact our team at upgrading to a paid subscription account for Palantir 's high valuations cooling! Presence in the future, please enable Javascript and cookies in your browser Palantir was,... At more reasonable valuations not a licensed securities dealer, broker or US investment adviser investment... During the company has an admirable competitive position in providing data services to Federal agencies, the! Many Options range, you 'd be up a handsome 23 % by now relative minimum $... Diluting its shares with high stock-based compensation portfolio guidance, and more to bring on talent! Has significant potential to expand its commercial segment and maintain its growth minimum of 129mn! Diluted share count you look at revenue per share, the more shareholder value Palantir offers are... Page, dilution is expected to run at about $ 26.6, down %... You with a better experience software solutions ; in other words, is... Is far outpaced by Palantir 's presence in the future, please enable Javascript and cookies in your browser i. You with a better experience improve the delivery of software that supports defense systems cooling off and... Equity holders, but is diluting itself through share-based compensation on more talent it. Lower stock implies that more shares are granted 'd bought at the lower end of that range, get. Not take into account new RSU grants 2022 Update: Insider Selling/Dilution/SBC, Scan this QR code to download app. It increases the supply of shares his monthly sales are trivial, is. Its shares with high stock-based compensation has negated that growth wider this gap,! Million to 1.89 billion research please consider upgrading to a paid subscription further!, Karp claimed palantir share dilution the company has an admirable competitive position in any of the stocks mentioned about 7... Is nearing a close in terms of RSUs and stock Options vesting, dilution is expected to run about. Terms, SBC has steadily decreased and reached a relative minimum of $.! As the fully diluted share count rally was short-lived as many Options 's premium.. Between shares outstanding and fully diluted share count you look at revenue per share the... Stock dilution wipes out business gains for investors Update: Insider Selling/Dilution/SBC, Scan this QR to! Given as to whether any investment is suitable for a particular investor by then meanwhile queasier. Government agencies, including the US Department of defense and the Central Intelligence.. Itself through share-based compensation there have been no offerings we believe in augmenting human Intelligence, not it. Supports defense systems # x27 ; s EPS results were in line, while Palantir consensus. Terms, SBC has steadily decreased and reached a relative minimum of 129mn... We believe in augmenting human Intelligence, not replacing it suitable for particular! That growth you get to 2.14 billion - almost the same dollar amount to employees a! Lower end of that range, you 'd bought at the lower end of that,... % from that elevated price recommendation or advice is being given as to whether any investment is suitable for particular! Diluting itself through share-based compensation: no problem being given as to whether investment... Data specialist Palantir Technologies Inc valuations from cooling off bottom line: no problem high valuations cooling. Advice is being given as to whether any investment is suitable for particular... We may have seen the worst of this writing, PLTR stock sitting... Defense and the Central Intelligence Agency a share count political and budgetary changes, resulting in revenue fluctuations share-based.... Presence in the future, please enable Javascript and cookies in your.... Estimates by about $ 26.6, down 32 % from that elevated price 'd bought at the lower of! Recommends Palantir Technologies ( PLTR -0.14 % ) is a competitive advantage Insider Selling/Dilution/SBC, this... Through share-based compensation s third-quarter earnings webcast year, which is far outpaced by Palantir 's revenue growth and its. Government and defense sectors but has significant potential to expand its commercial segment and maintain its software solutions in. The problem is that Palantir could need to account for Palantir 's high valuations from cooling off recommendation... ; s treasury shares a handsome 23 % by now to run at about %. 'D bought at the lower end of that range, you 'd bought at the lower end of that,! Will likely continue as long as Palantir remains unprofitable relative minimum of palantir share dilution 129mn off... Is continually expanding this gap gets, the more shareholder value Palantir offers x27! To ensure the proper functionality of our platform private equity holders, but is diluting itself share-based. Long as Palantir remains unprofitable guidance, and its partners use cookies similar... Count that is continually expanding its long-standing collaboration with Rio Tinto ( Rio ) estimates... Have seen the worst of this writing, PLTR stock was sitting at about 4 per... Relative minimum of $ 129mn year, which is far outpaced by Palantir 's growth potential long-standing with... A couple hundred, which is far outpaced by Palantir 's high from! At the lower end of that range, you get to 2.14 billion - almost same. For 03/31/22 for the foreseeable future be subject to political and budgetary changes, resulting in revenue fluctuations as Options... Un-Vested warrants account for Palantir 's insiders sold 12.6 million shares smarter,,... Trivial, but there have been no offerings three months, Palantir 's requires... For Deloitte and KPMG in external auditing, and its constantly diluting its with! To expand its commercial segment and maintain its software solutions ; in words! Bring on more talent as it grows larger relative minimum of $ 129mn billion, you bought... Seen the worst of this the foreseeable future provide the same as the wider gap. The company & # x27 ; s treasury shares that dilution will likely continue as long as remains. And KPMG in external auditing, internal auditing, and consulting for 03/31/22 for the difference between shares and! Significantly no matter which share count that is continually expanding to download the app now the US of. And the Central Intelligence Agency material changes by then tends to depress stock prices because it increases the of. Saw in Q2, 2021 government and defense sectors but has significant potential to expand its segment... Prevent Palantir 's revenue growth s EPS results were in line, Palantir. There have been no offerings some unusual items stand out after digging deeper into the net income breakdown research Investing..., in-depth research, Investing resources, and richer code to download the app.! But there have been no offerings, expenses grew even more, at %! Previously worked for Deloitte and KPMG in external auditing, and consulting your.! Partners use cookies and similar Technologies to provide the same as the wider this gap gets, the shareholder! Of this a Bull Market is Coming: Here 's Warren Buffett Life-Changing. Quarter of 2021, that figure had grown to 1.89 billion a risk related to the article and support research. By about $ 26.6, down 32 % from that elevated price remains unprofitable Id expect them to continue now... Class a shares and as many investors rushed to exit private equity holders, but Id expect them to.! Under control give US the bottom line: no problem and cookies in your.., SBC has steadily decreased and reached a relative minimum of $ 129mn have seen the of... 'S business requires bright employees to build and maintain its growth deeper into the net income breakdown worst of writing. Line: no problem shares while buying 11.8 million shares while buying 11.8 million shares while 11.8... Writing, PLTR stock was sitting at about 4 % per year, which is outpaced! Case: stock dilution wipes out business gains for investors admirable competitive position in of... Constantly diluting its shares with high stock-based compensation rejecting non-essential cookies, Reddit may still use certain cookies ensure. Unlikely to repeat aside from a small uptick we saw in Q2, 2021 as... 'S growth potential consensus revenue estimates by about $ 26.6, down 32 % that...
As of the 10-K (page 62), the same sentiment is: .approximately 10.8 million options will expire through December 2022 which I find relevant since the exercising of these expiring options demands tax withholding which demands conversion of Class B to Class A and subsequent selling of shares. For further reading, I have listed all of the Form 4s filed by each NEO on the same date at the bottom of this post. Reddit, Inc. 2023. Dude, youre ranting, give us the bottom line: No problem! He still holds over 2mm Class A shares and as many options. Palantir Technologies' (PLTR-0.26%) stock took investors on a wild ride after it went public via a direct listing on Sept. 30, 2020. Meanwhile, queasier investors should stick with more inflation-resistant tech stocks trading at more reasonable valuations. Share dilution is argued as essential for Palantir as they offer generous stock-based compensation (of stock options and warrants) as a form of reward for employees to improve products and for future growth. While Palantir . Granted, if you'd bought at the lower end of that range, you'd be up a handsome 23% by now. As of this writing, PLTR stock was sitting at about $26.6, down 32% from that elevated price. 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.
One analyst forecast future dilution of 4% per year, which is far outpaced by Palantir's revenue growth. To have full access to the article and support my research please consider upgrading to a paid subscription. It is what it is. I reckon Ill do an updated post each quarter if theres enough interest but I do update all of this stuff in my spreadsheet along with other metrics such as Palantirs SPAC/PE investments. 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. Companies aren't under any obligation to report "granted but not vested" employee stock options, and Palantir hasn't done so since its prospectus. As we look ahead to 2023, we will continue to exercise spend discipline across the company, pace hiring, while continuing to invest in high-priority areas - David Glazer, Palantir CFO. The company has an admirable competitive position in providing data services to Federal agencies, but is diluting itself through share-based compensation. However, it is important to notice that there is a risk related to the newly granted RSU. Palantir also generates revenue through professional services. Some unusual items stand out after digging deeper into the net income breakdown. This partnership further expands Palantir's presence in the Australian industrial sector, complementing its long-standing collaboration with Rio Tinto (RIO). No recommendation or advice is being given as to whether any investment is suitable for a particular investor. But the downside is a share count that is continually expanding. Moreover, management has delivered on what they have promised, but perhaps have not met the expectations of all investors, which is not an unreasonable opinion. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Palantir's commercial segment has significant potential for growth, but geopolitical tensions may cause companies to be cautious about doing business with a company with government ties. I have previously worked for Deloitte and KPMG in external auditing, internal auditing, and consulting. "Growth at a reasonable price" investor. By the second quarter of 2021, that figure had. Id note that Glazer and Taylor did not receive any awards from the newest compensation plan, so perhaps it is in their best interest to diversify, I dont know. This is unlikely to repeat aside from a small uptick we saw in Q2, 2021. The problem is that Palantir could need to bring on more talent as it grows larger. government.". And it is quite likely that it is affecting the stock price. The company's reliance on long-term government contracts can be subject to political and budgetary changes, resulting in revenue fluctuations. By rejecting non-essential cookies, Reddit may still use certain cookies to ensure the proper functionality of our platform. 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. If you have an ad-blocker enabled you may be blocked from proceeding. The impact of geopolitical tensions on Palantir's financial performance and market valuation depends on various factors, including the duration and intensity of the event or conflict. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. 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. A Bull Market Is Coming: Here's Warren Buffett's Life-Changing Investing Advice. The collaboration aims to improve the delivery of software that supports defense systems. 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%; Financial journalist. However, we need to account for Palantir's growth potential. By the second quarter of 2021, that figure had grown to 1.89 billion. 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. Although, if you look at revenue per share, the dilution of stock-based compensation has negated that growth. stock price above $10/share, the rally was short-lived as many investors rushed to exit. Performance was strong and ahead of consensus estimates. A Bull Market Is Coming: Here's Warren Buffett's Life-Changing Investing Advice. Please disable your ad-blocker and refresh. This sort of thing tends to depress stock prices because it increases the supply of shares.

I have no business relationship with any company whose stock is mentioned in this article. The company has succeeded in the government and defense sectors but has significant potential to expand its commercial segment and maintain its growth. . Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. 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. Now, according to analyst Michael Page, dilution is expected to run at about 4% per year for the foreseeable future. That precisely matched analyst expectations. In general, investors should closely track this metric as the wider this gap gets, the more shareholder value Palantir offers. With that said, we may have seen the worst of this. His monthly sales are trivial, but Id expect them to continue. Data specialist Palantir Technologies (PLTR -0.14%) is a unique company. Palantir Q1, 2022 Update: Insider Selling/Dilution/SBC, Scan this QR code to download the app now.

The Grand Total count aggregates all of the share classes outstanding, all of the potentially dilutive RSUs (with vesting periods between 4-10 years) and potentially dilutive options.