Why Would Palantir Be Acquired?
Is acquisition for Palantir the goal?
If you are reading this article right now, you are likely a shareholder of Palantir $PLTR. As shareholders it is important to make ourselves aware of every potential outcome of this investment.
While an acquisition may not be the outcome we are most bullish on for Palantir, with the share price being down over 65% in the last year, it should be addressed as a potential way out.
I will give one argument for why a company might want to purchase Palantir, and then follow that up with the rationale as to why it is very improbable. (notice the choice of words here, improbable not impossible).
Palantir currently exists as one of only three companies on the NYSE which have IL-6 clearance.
IL6 is reserved for the storage and processing of information classified up to the SECRET level. For a cloud deployment, information that must be processed and stored at IL6 can only be processed in a DoD private/community or Federal government community cloud.
The other two companies who have achieved this level of data security clearance with the US government are Microsoft’s Azure and Amazon’s AWS.
Consider for a moment all of the large companies that exist who do business with the US government who would stand to benefit massively from acquiring this IL-6 clearance.
Google, which doesn't even have IL-5 clearance,
IBM who works regularly with the government,
Snowflake, Oracle, Apple, Accenture
The list really could go on for a while.
All of these companies with the means spend billions of dollars on purchasing this clearance, let alone the added value of Palantir’s software and thousands of employees. Take for example, Meta has enough Cash on hand to purchase 3 Palantir's ($44B cash and Palantir’s market cap is $14B).
The reason why I do not believe Palantir will end up being acquired regardless as to how low the share price or market cap fall is because of the F shares in place.
When Palantir was going public through their DPO (Direct Public Offering), they made it so the majority of voting rights are held within just a few shareholders.
They did this through the creation of class F stock. These shares are different than the publicly traded share that you or I own, they serve a purpose
Generally, class F stock will have 10 votes per share, rather than 1 vote per share characteristic of traditional common stock. This is a super-voting characteristic and is common in companies where the founders highly value close control regarding outside equity investors.
Because of these shares certain shareholder actions require a majority vote by class F shareholders.
Alex Karp, Stephen Cohen, and Peter Thiel, the founders of Palantir, control up to 49.99% of the total voting power of the company’s stock.
The Class F shares can be converted into Class A (our shares) at any time, at the option of the holder. But let's ask ourselves what the odds are of these men willingly removing themselves from positions of power at Palantir.
If this is a good thing or a bad thing, that depends who you ask.
Either way the likelihood of Alex Karp stepping down from CEO of Palantir, which has grown to be an embodiment of his life work and ideals, is not very high.
What is your take on this?
An acquisition would destroy the potential for upside that we each likely believe there is here for Palantir. At the same time, it would destroy the risk of permanent loss of capital which is an investors worst nightmare.
There are dozens of mega cap companies that have the cash on hand to make a deal to acquire Palantir, the question is would any one actually do it and would management accept any offers dropped on their desk..
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