Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Crazy Stocks

Will Palantir Make Money?

Shares of the year’s strangest and most controversial initial-public offering (IPO) Palantir Technologies Inc. (NYSE: PLTR) are trading.

Even Palantir’s IPO sowed confusion. Some investors could not tell if Palantir started trading, Bloomberg claims. Palantir confused investors by using the rare direct listing process instead of traditional IPO.

Palantir (PLTR) began trading at 1:38 pm on 7 October and stopped around 3:30 PM the same day, Bloomberg claims. Regular trading began a few days later. Some investors claim they could not sell PLTR shares because of trading glitches, Bloomberg alleges.

Predictably, Mr. Market has little faith in Palantir. Mr Market paid $10.27 for Palantir shares at the start of trading on 7 October 2020. By 13 October 2020, Palantir’s share price fell to $9.47. Thus, Palantir has lost share value since appearing on the NYSE.

The Controversy at Palantir

To complicate matters, two members of the US House of Representatives sent a letter demanding the Securities and Exchange Commission (SEC) investigate Palantir. Three Democrats want an SEC investigation because Palantir receives money from the CIA and has contacts with Qatar’s government.

U.S. Representatives Alexandria Ocasio-Cortez (D-New York) and Jesús G. Garcia (D-Illinois) also allege Palantir violates Americans’ Constitutional rights, CNET report. The Representatives want Palantir to disclose information about Q-Tel’s stake in the company. Q-Tel is a venture capital firm associated with the Central Intelligence Agency (CIA).

Democrats are also angry over Palantir’s contract to maintain the Trump administration’s coronavirus database, CNET reports. Palantir also has contracts with the US Department of Health and Human Services and the UK’s National Health Service.

Palantir is controversial for its contracts with federal law enforcement agencies and work with police departments in the United States. BuzzFeed News claims the Los Angeles Police Department (LAPD) uses Palantir technology to gather data about citizens. Data gathered by a platform they call Palantir Gotham includes license plate numbers and physical descriptions of citizens.

What is Palantir (PLTR)

Palantir (PLTR) provides data services, databases, and cloud-computing solutions for government agencies.

Palantir is controversial because its customers include intelligence and law enforcement agencies. Critics call Palantir a surveillance company because it works with law enforcement agencies.

One reason Palantir is controversial is its association with venture capitalist Peter Thiel. Many people dislike Thiel because of his support for President Donald J. Trump (R-Florida). Thiel is a well-known member of the famous PayPal mafia.

Why People are investing in Palantir

Ironically, many others will invest in Palantir because of its association with Thiel. To explain, many people associate Peter Thiel iwith two profitable companies: PayPal (NASDAQ: PYPL) and Facebook (FB).

 Thiel was a cofounder of PayPal (PYPL). PayPal reported a quarterly gross profit of $2.555 billion and $13.048 billion in cash and short-term investments on 30 June 2020. In 2020, PayPal’s share price rose from $110.75 on 2 January to $207.74 on 13 October.

Thiel was an early investor in Facebook. Facebook (NASDAQ: FB) reported a quarterly gross profit of $14.858 billion and $58.24 billion in cash and short-term investments on 30 June 2020. Facebook’s share price fell from $2209.78  on 2 January 2020 to $276.14 on 13 October 2020.

Does Palantir Make Money?

Thus Thiel has an impressive track record as an investor. However, there is no evidence Palantir makes money or could make money.

I could locate no financial data for Palantir. Moreover, there are rumors some of Palantir’s contracts are secret. Thus, we do not know who some of Palantir’s customers are and how much money they pay Palantir.

However, investors bought could have bought 20.240 million Palantir (PLTR) shares. To explain, Yahoo! Finance estimates Palantir had a 20.24 market volume on 12 October 2020.

Why Palantir Scares Me

Palantir (NASDAQ: PLTR) frightens me because investors are buying millions of shares in it.

I am scared of Palantir because people are buying millions of shares in a company that may not make any money. Instead, Palantir could lose vast amounts of money.

The fact that Palantir reached the markets and found investors scares me. Palantir shows that today’s investors, like investors in any period of history will buy anything.

Will Palantir Burst the Stock Bubble?

Worse stocks with no verifiable value are trading heavily. I think the Palantir IPO signals a bubble. If Palantir stock crashes and burns it could burst the ongoing tech bubble on Wall Street.

I think a stock bubble bursting could lead to catastrophe because America’s economy is in terrible shape because of coronavirus. A bubble burst could create panic and sell off in the markets leading to 2008 style meltdown.

Under normal conditions, the floating of a questionable IPO such as Palantir (PLTR) could have no effect on the overall market. Today, however, the crash of one stock could bring the whole house of cards on Wall Street down.

I think investors need to stay away from Palantir because this stock has no visible moneymaking capabilities. However, investors need to watch Palantir because its crash could derail today’s irrational bull market.