Palantir collapses as lockout expiration opens 80% of its stock for trading

• Palantir shares sank on Thursday as the expiration of the lock-up allowed 80% of the company’s shares to trade on the open market.
• Citi analyst Tyler Radke warned of a potential drop due to the expiration of the block in a note to clients in January.
• Cathie Wood, CEO of Ark Invest, said she still believes Palantir is going in the right direction by spending on innovation.
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Palantir shares sank on Thursday after the company’s lock-up expired, which released around 80% of the company’s stock to trade on the open market.

Palantir had seen its stock price more than triple since its IPO before a surprise profit loss on Tuesday affected momentum. Still, the company’s shares have risen about 185% in the past six months leading up to Thursday’s fall.

When the Denver-based company went public via direct listing in September, early investors were forced to hold onto their shares due to a lock-up clause. Now that the clause has expired, that means a number of large Palantir investors could look to cash in as part of the recent rally in the share price. If they do, it could drastically drop the stock.

Citi analyst Tyler Radke had warned of such an event in January. The analyst demoted Palantir to “sell” in a note to clients, saying the high valuation of the big data company, slowing growth and expiration of the lockdown could lead to a sell off.

Some large Palantir investors have already stated that they “will continue to sell shares as permitted”.

Soros Fund Management, which revealed in November that it started investing in Palantir in 2012 and held 18.46 million shares at a time, said it would continue to divest from the big data company.

“SFM does not endorse Palantir’s business practices,” the company said in a statement last year. “SFM made this investment at a time when the negative social consequences of big data were less understood. SFM would not make an investment in Palantir today.”

Palantir still has a host of supporters, including many analysts. Goldman Sachs analysts more than doubled their price target to $ 34 per share for the Big Data firm after Tuesday’s results, citing a path to “sustainable growth.”

Another big supporter of Palantir is Cathie Wood, CEO of Ark Invest.

In an interview with CNBC on Wednesday, Wood said Palantir CEO Alex Karp “spoke our language” on the quarterly conference call and that the company’s aggressive investments were the right way forward. Sacrificing short-term profitability for long-term growth is a clear advantage. according to Wood.

The CEO argued that companies “haven’t spent enough on innovation” and praised Palantir for his “refreshing attitude.”

“We don’t want profits now, we want them to invest aggressively,” Wood said.

Palantir stock traded down 7.13% to $ 25.14 at 11:43 am ET on Thursday.