Asana and Palantir begin trading well above reference prices in dual direct listings

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Asana Inc. was the first direct listing out of the gate Wednesday, but Palantir Technologies Inc. received a bigger boost from its reference price amid dual debuts for the two software companies with ties to Facebook Inc.

Asana began trading at 12:35 p.m. Eastern time at a price of around $27, for a valuation of roughly $4.1 billion. NYSE set a reference price of $21 for the stock. Less than 15 minutes after its first trade, Asana shares were up about 40%, and were last up 35% at $28.44, following an intraday high of $29.79.

At 1:40 p.m. Eastern, Palantir shares started trading, bolting out of the gate with 40% higher than the reference price. Shares were last up 52% at $11.00, following an intraday high of $11.42. The New York Stock Exchange had set a reference price of $7.25 a share based on private-market trades of the stock, and The Wall Street Journal reported last week that the company expected shares to open around $10.

Reference prices for direct listings are based on trading prices in private markets ahead of companies filing with the Securities and Exchange Commission for a public listing. Direct listings differ from IPOs because there is no capital raised, which is what places a dollar figure on shares in an IPO. Direct listings are largely expected to trade higher than the reference price.

Asana
ASAN
is a collaboration-software company co-founded by Facebook co-founder Dustin Moskovitz, who serves as chief executive, while Palantir
PLTR
is a data-software company co-founded by early Facebook
FB
investor and board member Peter Thiel. Both companies chose to list their shares directly instead of selling new stock in an initial public offering, a route that was previously taken by Spotify Technology SA
SPOT
and Slack Technologies Inc.
WORK,
which were also mature startups that sold shares repeatedly in the private markets and were looking to provide investors with public trading options.

In an interview Wednesday with MarketWatch, Palantir Chief Operating Officer Shyam Sankar said the company made the decision to go public about midway through 2019, with an eye on the back half of 2021. After the pandemic struck, he said the company sped up its timeline to Wall Street.

“COVID really accelerated the business and it became clear it was a time for us to think about” going public sooner, Sankar said.

Sankar called the direct listing “momentous” and “exciting,” and said the company made the decision to list instead of perform an IPO because it did not need capital but did want to offer investors a chance to cash in on their stake.

“We have had incredibly patient investors — especially our most important ones, employees — and this gives them more access to the market immediately,” he said.

Palantir launched its first software platform in 2008, and was long known as a secretive software startup focused on military and law-enforcement uses, courting controversy for its work with the Immigration and Customs Enforcement division of the U.S. government. The company has since launched a second offering that has attracted clients from the private sector, and grown much more vocal about its business, including a public divorce from Silicon Valley in which co-founder and Chief Executive Alexander Karp detailed a move away from California and defended his company’s work for the government.

Moskovitz launched Asana in 2008 as well, developing software tools that compete with Atlassian Corp.’s
TEAM
Trello. The San Francisco company registered $143 million in revenue in its 2020 fiscal year, up 86% year-over-year. The company also reported that losses grew, to $118.6 million in fiscal 2020 from $50.9 million in fiscal 2019.

The 700-person company, based in San Francisco reported revenue of $52 million for the three months ended July 31, up 57% year-over-year. Its net loss during the period jumped to $41.1 million, compared with a $15.6 million loss for the same period last year. The company has yet to turn a profit.

Palantir is also far from profitable, revealing in its SEC filings that revenue grew to $742.6 million in 2019 from $595.4 million in 2018, while losses stayed even at more than half a billion dollars a year — $579.6 million in 2019 and $580 million in 2018. In the first six months of this year, Palantir recorded a loss of $164.7 million on revenue of $481.2 million, after recording a loss of $280.5 million on sales of $322.7 million in the same period of 2019.

Choosing a direct listing instead of an IPO allowed both companies to publicly offer forecasts for future performance. Palantir calls for revenue growth of 46% to 47% in the third quarter, 41% to 43% for the full year of 2020, and greater than 30% in 2021. For fiscal 2021, Asana projects revenue of $210 million to $213 million, representing year-over-year growth of 47% to 49%. 

Despite the COVID-19 pandemic, the market for IPOs has been strong in 2020. Aside from Wednesday’s direct listings, Wall Street was expecting 11 IPOs this week, wrapping up the busiest third quarter for offerings since the dot-com boom, according to Renaissance Capital. Software offerings have been a big part of that, as the pandemic has created demand for strong software offerings that can allow workers to continue performing tasks from home — Snowflake Inc.
SNOW,
Unity Software Inc.
U
and others have flourished in their market debuts.

Wallace Witkowski came to MarketWatch from the Associated Press in New York, where he was a business reporter specializing in pharmaceutical companies. He previously reported for trade publications in covering the drug and medical-device industries back to 1998. Based in San Francisco, his focus is on U.S. equities. Follow Wally on Twitter at: @wmwitkowski.

Jeremy Owens is MarketWatch’s technology editor and San Francisco bureau chief. You can follow him on Twitter @jowens510.

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Source: https://www.marketwatch.com/story/asana-shares-surge-more-than-30-while-palantir-still-awaits-first-trade-11601485452

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