Palantir Technologies’ raison d’etre is identifying patterns hidden within mountains of data. Yet somehow it didn’t spot the risks in its own investment strategy or the danger that startups might not be able to pay their bills, Bloomberg reports.
Palantir’s losses from a portfolio of businesses that went public via special purpose acquisition companies, show the dangers of correlated stock investments and an unsustainable growth strategy.
Co-founded by outspoken entrepreneur Peter Thiel and known for its work with the intelligence community and the UK’s National Health Service, Palantir has spent $450 million since 2021 acquiring shares in about two dozen early-stage companies, nearly all ex-SPACs. The quid pro quo: The startups promised to purchase Palantir software and services, typically of a value that was equal or greater than its investment.
Realized and unrealized losses on the SPAC portfolio reached 75% at the end of September, or about $333 million, according to an analysis of Palantir’s latest accounts. The red ink may have increased since then. Because many of these startups now face a cash squeeze, Palantir may also be overestimating how much revenue it will receive from them.
The SPAC misadventure features in several class action lawsuits by investors that the company intends to defend “vigorously,” according to its third-quarter accounts. Palantir declined to comment.
Though backing a bunch of SPACs seems hubristic in hindsight, it’s the kind of thing that happens when the stock market is awash in liquidity and rewards growth above profits. Read more.
