Wednesday, September 19, 2018

"Morgan Stanley's long romance of Palantir pays off as IPO nears" (also Thiel on dope)

We don't put money into IPOs, can't get the ones we want, too much of ones we don't; but the information content of an IPO, both in disclosure and as a measure of sentiment can be quite valuable.
In the case of Palantir you can bet there will be tremendous demand for the offering documents in certain northern Virginia locales as well as Moscow, Beijing, Tehran and Tel Aviv.
London and Paris as well.

First up, Bloomberg via Crain's New York Business, September 4:
Morgan Stanley is usually at the forefront of whisking young tech companies public—handling stock offerings for Apple Inc., Google Inc. and Facebook Inc. Now its bankers are finding it’s also lucrative to slow-walk a unicorn into the light of day.

After a decade vying with Wall Street rivals, Morgan Stanley is emerging as the adviser-of-choice for Palantir Technologies Inc., Peter Thiel’s secretive data-mining and visualization venture. The bank has earned about $60 million in fees arranging private funding for the 14-year-old company. That haul might double if Morgan Stanley handles an initial public offering for Palantir, a deal people familiar with the matter say is nearing as the company turns profitable.

The investment bank’s spot at the front of the herd caps an unusually long and elaborate Wall Street courtship of a Silicon Valley startup. Along the way, some of the financial industry’s largest firms have taken stakes in Palantir, become its customers, and in one case, even stumbled into a minor scandal, prompting a severing of ties.

At Morgan Stanley, investment bankers led the effort to build a relationship, but a sleepier part of the firm also proved pivotal. Its $474 billion asset-management arm helped provide funding to Palantir, giving the private enterprise time to develop.

Morgan Stanley is among banks that arrange equity investments for big investors including family offices, hedge funds and sovereign wealth funds, helping pump additional cash into the likes of Uber Technologies Inc., WeWork Cos. and Flipkart Online Services Pvt.—closely held ventures that, in an earlier era, would probably have gone public already. Part of the reason Palantir picked Morgan Stanley was its ability to work with government-backed entities that tend to be patient, long-term shareholders, two people said.

Palantir expects to turn a profit in 2018 and will probably file for an IPO in 2019 or early 2020, according to people with knowledge of the matter. The increasingly earnest preparations for its debut have added urgency to banking relationships that have been in flux for more than a decade.
Representatives for Palantir and Morgan Stanley declined to comment.

Morgan Stanley began strengthening ties to Palantir Chief Executive Officer Alex Karp more than five years ago in an initiative that involved the bank’s chief operating officer at the time, Jim Rosenthal. Morgan Stanley became a customer of Palantir and began raising capital for the data firm. Some of Morgan Stanley’s most senior dealmakers—technology banking chief Michael Grimes, head of private sponsors David Dwek, and lead software dealmaker David Chen—nurtured the relationship.
Watching bankers
While regulatory filings show Morgan Stanley has been the primary bank arranging private funding to Palantir in recent years, it wasn’t always necessarily in the lead.

JPMorgan Chase & Co. became one of Palantir’s first large commercial customers, enlisting its help to hunt for misconduct in the wake of the 2008 financial crisis. That was a turning point for the startup, which previously catered to the Department of Defense and other government agencies. At times, Palantir stationed more than 100 engineers at the bank’s offices, which functioned as an unofficial research and development lab to develop commercial applications.

JPMorgan praised Palantir’s software publicly, using it for years to spot insider trading and fraud, and inducted the startup into its Hall of Fame. The bank also bought a stake in the venture. But, after a senior JPMorgan executive got caught using the software to spy on employees, the relationship unraveled. The bank quietly shut down the program a few years ago.

UBS Group AG also has worked with Palantir in the past, although its history is less colorful. It helped raise some private funding for Palantir in 2015 but isn’t currently working as a formal adviser to the company, two people familiar with the situation said.

At its peak in 2015, Palantir investors valued it at $20 billion. An IPO for such a company would generate about $60 million in underwriting fees, according to consulting firm Freeman & Co., which based its estimate on a transaction for $2 billion in proceeds....MORE
And at ZeroHedge earlier today:

How Peter Thiel Made A Killing In Tilray
The momentum stock du jour - Tilray - has captivated trader attentions ever since its IPO at $17 in July, following which it has catapulted in what has been a relentless parabolic fashion. And while most know the general story behind the Canadian pot company, what may come as a surprise is that Tilray CEO Brendan Kennedy’s Privateer Holdings, holds more than 58 million of the total 76 million shares outstanding, a stake now worth more than $12 billion after the stock soared more than 10-fold from its July public offering. And, according to Bloomberg, when Tilray’s unlisted Class 1 shares are included, Privateer’s holdings rise to almost 75 million shares, worth more than $15 billion.

The curiously low float - together with a painful short squeeze - is one of the reasons behind the stock's tremendous move. As Bloomberg notes, the limited number of shares available for trading is also be adding to the volatility, making it more expensive for skeptical investors to short the stock. That however has not daunted the skeptics such as Citron Research, which earlier on Wednesday said it remains short on Tilray, calling the stock’s surge “beyond comprehension” in a Tweet Wednesday.
However, what even fewer know is that one of the biggest winners from Tilray's explosion, is none other than Peter Thiel who is an investor in Privateer.

Privateer’s partners include Brendan Kennedy, 46, who serves as Tilray’s chief executive officer, Michael Blue and Christian Groh. Kennedy and Blue are both graduates of Yale School of Management’s MBA program. Kennedy and Groh both formerly worked together at SVB Analytics, a non-bank affiliate of Silicon Valley bank.

Thiel’s Founders Fund became the first institutional investor in the cannabis industry through Privateer Holdings’ $75 million Series B financing round in December 2014, according to the company’s website. That stake may now be approaching (or has surpassed) $1 billion.

And as investors were counting their profits, Tilray surpassed Canopy Growth as the world’s largest cannabis company, with a market value of more than $20 billion. Canopy, which added a New York listing in May, is worth only $12 billion. Tilray jumped another 50% to $230, giving it a value higher than American Airlines Group....