- Palantir SPAC Investment Overview.
- The Philosophy Of SPAC Investments.
- The Street’s View On SPAC Investments.
- The Innate Risks Of SPAC Investments.
- Palantir SPAC Investment Overview.
Palantir has invested over $450M within SPACs over the course of the past year. Whilst, per the COOs Sankar’s’ recent commentary, the SPAC initiatives are expected to peak, this report will investigate the philosophy of the SPAC strategic investments for Palantir.
- The Philosophy Of SPAC Investments.
Palantir, since inception, have battle-tested their software within the context of intelligence agencies, and the Governmental sphere. We believe that this initiative was paramount for the success, and viability of Palantir’s’ current products. This is because, throughout the Government sphere, Palantir over an 18 year period were trailing, testing, and adapting their software within some of the harshest conditions possible.
The philosophy of SPAC indicatives is very similar, if not identical. This is because, through the SPAC initiatives, we believe that this is a methodological approach for Palantir to test, trial and adapt their software to the needs of smaller companies, and early stage start-ups. This will enable Palantir to gain insights into the needs and necessities of small start-ups, and the ability to identify innate weaknesses and strengths of their current software’s. Overall, we believe that this unconventional approach to business is reinforcing the ideological view of Palantir – namely their anchoring towards a 10+ year vision. Whilst Palantir current do not have any viable competitors within the OS scene, recent commentary has suggested that there is much concern over big-technology giants, such as Google, eventually competing within the OS space against Palantir.
To add, whilst conventional investors are focusing on the valuation of these strategic initiatives within equity markets, we believe that the non-monetary value of these initiatives is far more important. In other words, the importance of Palantir battle-testing their product within the context of small start-ups, is of far more importance, in comparison to the equity valuation of these investments.
Interestingly, Palantir are not the only company that uses this investment initiative to gain customers. Snowflake also has an investment initiative, called Snowflake ventures. The aim of this initiative is very similar: namely to invest within small companies, and thereby use Snowflake partnered solutions. Snowflake Start-up Challenge brings together early-stage start-ups to build applications and products within the Snowflake Data Cloud. These start-up are then rewarded in a monetary value. However, it is vital to note the amount Palantir invests, in comparison to Snowflake is far more extreme and costly. We also believe that these SPAC initiatives are similar to Palantir Foundry for start-ups, in which Palantir is building a pragmatic solutions towards garnering vital competitive moats within the context of smaller organisations.
- The Street’s View On SPAC Investments.
Wall Street have a very pessimistic view towards these SPAC investment programs. Interestingly, the Street point towards Palantir SPAC initiatives as a gimmick, or a method to “buy revenue” in a misleading manner. Whilst we acknowledge the view of the Street, we believe that this pessimistic approach is a fundamental misunderstanding of Palantir’s unconventional business model, and their irresistible notion of anchoring towards long term competitive moats.
- The Innate Risks Of SPAC Investments.
We understand that through this unconventional business model, there is huge distrust and pessimism towards the philosophy of Palantir and the viability of their product. Whilst the unconventional model has strengths, there are also evident downfalls towards the methodological approach to business.
Damaging to the underlying EPS of the company is the most overlooked factor of the strategic initiative. Palantir within their Q4 ER 2021 experienced a major miss on EPS. This is explained through the unrealised losses from strategic investment programs, which thereby have caused a misleading representation of EPS for the fourth quarter. Evidently, this highlights a major flaw within Palantir’s investments, as it is likely within the next few quarters that these unrealised losses will continue to damage the underlying EPS bottom line.
In addition to this, it is likely that a range of these SPAC initiatives will not succeed in the future, thereby causing a potential loss of upwards of $450M from the perspective of Palantir. In consideration of the potential upcoming recession, as well as the overall concern regarding the future of the economy, there should be an emphasis on these SPAC business initiatives failing.
Whilst we are not as concerned with the strategic SPAC investments, we are concerned with Palantir’s poor sales team performance. We believe that the reason the Street calls the SPAC initiatives as a method to “buy revenue and customers” is due to the poor performance of Palantir’s historically small sales force. Instead of pointing the figure towards the SPAC investments to “buy revenue and customers”, we believe that the figure should be pointed towards Palantir’s historically small, and underperforming sales team to successfully gain deals q/q.
