Two of the most keenly anticipated tech flotations of the year traded higher after debuting on the US stock market in direct listings on Wednesday.
Shares in Palantir, the data analysis company backed by Silicon Valley investor Peter Thiel, advanced 10 per cent above their opening price to $11, valuing the company at $17.8bn.
The valuation is short of the $20bn it achieved in private hands five years ago, a gap partly explained by investors unsure whether to value the company as a tech business or a consultancy.
Asana, the business software company led by Facebook co-founder Dustin Moskovitz, opened at $27 and touched $29 by early-afternoon in New York, valuing it at nearly $4.5bn.
Asana sells task-management software used by organisations including Google and Nasa. At its most recent equity fundraising in November 2018, the company was valued at $1.5bn.
The duo enter a hot market for tech listings, following the cloud computing company Snowflake’s $3.4bn initial public offering earlier in September. That marked the largest of the year and the biggest on record for a US software group.
“Both companies are fast growing and highly unprofitable,” said Bill Smith, chief executive of Renaissance Capital, a fund manager of IPO exchange traded funds. “Asana has achieved a sticky customer base and strong net retention, and Palantir has long contracts with its customers.”
The twin debuts are also a test for direct listings, a process that has emerged as an alternative to the traditional IPO. Palantir and Asana used Morgan Stanley as lead adviser and Citadel Securities as the market maker overseeing the trading for both listings. Unlike in an IPO, the companies had to match demand from public investors with supply from existing private shareholders to execute their first trades.
Both companies listed on the New York Stock Exchange, which on Tuesday released a reference price of $7.25 for Palantir, implying the company would have a market capitalisation of about $11.7bn. The exchange listed Asana’s reference price at $21.
Reference prices, based on private trades, act as a guide to the market but are not the same as an IPO price, which is the amount investors pay for shares in a typical flotation. Both Slack and Spotify, which went public through direct listings, traded above their reference prices upon listing.
Palantir stands apart from the Silicon Valley tech establishment for brandishing its close ties to the national security community.
The company is led by Alex Karp and co-founded by Mr Thiel, the venture capitalist whose support for President Donald Trump has placed him at odds with his more left-leaning peers. Along with another co-founder, Stephen Cohen, they will retain control of the company through a complex voting structure that has raised concerns among corporate governance watchdogs.
Unlike in similar direct listings, Palantir will keep the majority of its stock locked up for months after it goes public, allowing only a portion of its class A common stock to trade on the first day.
The direct listings join 11 IPOs this week, making it one of the year’s busiest. The run of flotations has tracked the booming stock market rally against the backdrop of the Covid-19 pandemic.
Proceeds raised in IPOs for the year have already eclipsed every year since 2014, when Alibaba set a record for the largest US listing, according to Refinitiv data.