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Obviously, I don't know what's going on at Palantir besides what I've read, but I know a few things about Finance. A tax loss isn't necessarily all bad news. I
by ryansmccoy 6y ago
Obviously, I don't know what's going on at Palantir besides what I've read, but I know a few things about Finance.
A tax loss isn't necessarily all bad news. If you have a tax loss in one year, you might be able to use that loss to offset profits in future years, to minimize taxes for your business in those years. This technique is called a tax loss carry forward because it takes a tax loss in one year and carries it into a future year.
So, what they might be doing is using this as an opportunity to "throw the baby out with the bathwater," as the saying goes. Show a bunch of losses prior to IPO (setting expectations low), then show gradually improving operating results. Investors love this kind of "story" because the potential for stock to go down is less then if they were to show a booming business right off the bat.
Finally, just to make a point about investors not necessarily being worried about a company showing losses, all you have to do is look at Amazon, who for years showed loses.
- stu2b50 6y agoWhat shocked me more than the loss was the honestly kinda ass revenue for their valuation. This isn't Uber with billions in revenue while losing in money. >In the screenshots of the company’s financials, Palantir lists a net loss of roughly $580 million for 2019, which is almost identical to its loss in 2018. The company listed a net loss percentage of 97% for 2018, improving to a loss of 78% for last year.
- matchagaucho 6y agoHad they spent the money on ops or DoD compliant hosting infra, I would agree the long-term gains offset the near-term losses. But as an Investor, it concerns me they spent $900M on Sales and Marketing in the Gov sector over 2 years. That is essentially a lobby-dependent business model with long-term success contingent on the currently elected administration.
- ryansmccoy 6y agoYea, I don't know what's going on besides what I read. I would much rather see the screenshot for myself then have someone else explain to me what they think the most important aspects of it are.
- vkou 6y agoIf you grease up both candidates, your long-term success is not contingent on the current administration. Since it's incredibly unlikely that an anti-surveillance, anti-warhawk, anti-police state candidate will ever become president, and it's incredibly unlikely that congress will be dominated by those sorts of folks, I think Palantir's business model is safe as houses.
- dmix 6y agoPlus the party power brokers seem to stick around for a long time. It's really only the executive branch that changes often.
- earthshot 6y agoIt gives the appearance of being a business with consulting economics moreso than tech/product economics, and tied hard to government contracts. I'm sure there are a bunch of dipshit investors who will give it a tech multiple because they're idiots. But it doesn't deserve one. I hope it fails.
- otoburb 6y agoI may have missed this in the article but I don't think the S&M expense of $450M per year was broken out by Government vs. Commercial segments. That would be more relevant to the discussion to estimate the expense allocation between direct sales forces for gov & enterprise, pure media/advertising spend, and lobbying.
- mlindner 6y ago> That is essentially a lobby-dependent business model with long-term success contingent on the currently elected administration. Unfortunately these type of setups tend not to care who is in power. As the types in power are never against this type of company. Look at Democrat support for NSLs (Obama notably expanded use of them despite being against them while campaigning).
- arnaudsm 6y ago"But Amazon showed losses for years" is probably the most used argument of the decade to defend unprofitable startups. Palantir is 17 years old.
- vchak1 6y agoI think here you need to look at their main weakness, which is strong reliance on government contracts. If Trump loses the next election then there will be a major change that will likely adversely affect them. Peter Thiel is one of the founders of Palantir.
- techfoolery 6y agoAnd? Let's assume Trump loses, Biden wins. Do you have a specific basis to say that'll significantly change things for Palantir? Noting Thiel/Trump's relationship seems insignificant. There'll always be entrenched national defense & security + intel bureaucrats who hold power, regardless if a Democrat or Republican is in office. Seems Palantir has at least spent a pretty penny building relationships with some of those folks.
- statictype 6y agoHe’s an investor in it. Is he also a founder?
- prepend 6y agoYes, it was spun out of PayPal’s fraud detection [0]. [0] https://en.wikipedia.org/wiki/Palantir_Technologies https://en.wikipedia.org/wiki/Palantir_Technologies
- JMTQp8lwXL 6y agoThe magnitude of Amazon's losses are incomparable. Palantir losing half a billion in one year is significant. Amazon's loses were <$10 million in the mid 90's. [0] The article's title gets straight to the point. "Why Amazon’s History Of IPO-Era Losses Means Little For Today’s Unprofitable Unicorns". [0]: https://news.crunchbase.com/news/why-amazons-history-of-ipo-era-losses-means-little-for-todays-unprofitable-unicorns/ https://news.crunchbase.com/news/why-amazons-history-of-ipo-...
- ryansmccoy 6y agoUnless I'm mistaken, according to Amazon's 10-K in 2002, they showed a Net loss of: 2002 - Net Loss: -$ 149 million 2001 - Net Loss: -$ 567 million 2000 - Net Loss: -$ 1.41 billion 1999 - Net Loss: -$ 719 million 1998 - Net Loss: -$ 124 million Source: https://www.evernote.com/l/AUlIcX9k_elHUY7Fjsg749afPPxh3verZZA/ https://www.evernote.com/l/AUlIcX9k_elHUY7Fjsg749afPPxh3verZ...
- JMTQp8lwXL 6y agoPalantir's revenue was $742 million in 2019, so it's relative. How is Palantir going to scale to 10x, 100x current revenue? Is federal spending going to balloon to accommodate that growth? Amazon took a bite out of big-box retailers. They could grow by stealing their competitor's revenue streams. Palantir doesn't have that option, unless there are other equally giant contractors they can knock out.
- ryansmccoy 6y agoI haven't seen the S-1, so I don't know.
- randycupertino 6y agoDo you think the recent announcement about moving their HQ to Colorado is also a tax dodge?
- ryansmccoy 6y agoAgain, I don't know, but I'm comfortable speculating that it is (partially). The other obvious reason that I could think of is that Colorado is a very appealing location to live (for some people) and when you are trying to attract talent, it could be used as an incentive to get them to join the company. Another reason, could be customers located in the area.