case study
Palantir
Overview
Palantir Technologies (“PLTR”), founded in 2003 by a group of well-known entrepreneurs, originally built software for the U.S. intelligence community but later expanded into enterprise contracts.
Palantir created a central operating system for data (from gathering information on terrorists to organizing airplane parts). In early 2020, Palantir had been accelerating growth, ahead of its long-awaited IPO. ACI had followed Palantir’s progress for quite some time through its network of private market partners. Prior to IPO, ACI was able to secure a position in Palantir’s private stock – through our private market partners, at a discount to what we had determined the IPO price range – determined through our close connections with various investment bank’s placing the shares. At IPO ACI was able to sell short shares well above our acquisition price.
Thesis
Palantir’s accelerating growth and demand for its products set up the potential for a strong IPO. Through ACI’s strong relationships we were offered shares in the mid-$5/share range after S-1 was issued, and we had determined price talk was comfortably in the $8-9/share range. ACI, quite familiar with Palantir, believe this was an opportunity invest at a very favorable price, and to hedge the gains (selling short post-IPO shares). Further, as the anticipation and excitement around Palantir was so high, ACI believed there may be trading opportunities to drive further profits.
Structure
Purchased private pre-IPO shares at deep discount (~$5.50/share) in June 2020, three months prior to PLTR’s IPO in September 2020.
Amidst massive trading volume (average volume 130mm shares/day), and high volume and liquid options markets, hedged and traded the position post-IPO.
We locked in gains at an average sale price of ~$16/share.
Return Profile
The Edge
ACI strong buy and sell-side relationships, strong underwriting discipline, and trading expertise produced a strong edge for ACI in the PLTR investment.
ACI had been watching PLTR, doing it’s work preemptively ahead of an expected IPO, and was able to move quickly when an opportunity presented itself.