The Technology 202: Activists slam Palantir for its work with ICE ahead of market debut

The Technology 202: Activists slam Palantir for its work with ICE ahead of market debut

Originally Published in The Washington Post

Tonya Riley and Cat Zakrzewski - September 29, 2020

Palantir, which is expected to start publicly trading stock tomorrow at a reported $22 billion valuation, could be one of the biggest tech companies to go public since Uber. The big data firm is selling investors on a promise to become the “default operating system across the U.S. government.”

But activist groups and human rights watchdogs say that the company’s track record of working with Immigration and Customs Enforcement and countries with questionable human rights records makes it a bad investment. They spent the last week protesting online and in-person to highlight concerns to investors ahead of the public listing.

“There is a high risk that Palantir is contributing to human rights violations of asylum-seekers and migrants through the ways the company's technology facilitates ICE operations,” Amnesty International said in a report released yesterday that accused Palantir of failing to guarantee its software isn’t being used to aid in human rights abuses and racial profiling against migrants. Palantir, which declined to comment for this piece citing its “quiet period” running up to the public listing, has said its software is not used for raids or deportations.

Co-founded by Peter Thiel, a prominent donor to President Trump, the company has flourished under the Trump administration. It's picked up contracts not just in defense and immigration but also a roughly $25 million deal with the Department of Health and Human Services to work on the response to the coronaviruspandemic. But its work providing digital profiling tools to ICE that helps with raids and deportations has long made it a target of activists and even caused turmoil within its own ranks. 

Palantir Technologies signage is displayed outside the company's headquarters in Palo Alto, Calif. (David Paul Morris/Bloomberg News)

Civil rights groups in the United States are now turning to the Internet to protest. 

Civil and labor rights groups Color of Change, Jobs with Justice, Fight for the Future and MediaJustice joined an online protest yesterday led by immigration rights advocacy group Mijente. The online demonstration, which followed a week of in-person protests at Palantir's offices, spread the hashtag #DefundPalantir to raise awareness about the data analytics software company's work with ICE.

Mijente, which launched the #NoTechForICE campaign in 2018, has pushed for Palantir to cut its contract with ICE. In addition to raising awareness to lawmakers, the group's efforts have led to more than 3,000 students pledging to not working for the company and some schools dropping recruitment partnerships. 

Mijente wants investors to view investing in Palantir as just as damaging to society as investing in fossil fuels or tobacco. “We think the same principle should apply to companies that are creating tech and data for police and military contractors, that are violating people's human rights and contributing to over-policing of communities of color,” said Jacinta Gonzalez, field director and senior campaign director for Mijente.

The group has also rallied with other activist groups to ask BlackRock, one of Palantir's biggest investors, to divest.

A protest outside of Palantir's Palo Alto headquarters. (Jim Colton/Pro Bono Photo)

Nonprofits focused on corporate responsibility have also expressed concerns.

The Investor Alliance for Human Rights, a nonprofit initiative focusing on investor responsibility, published a risk briefing earlier this month warning about Palantir's business relationships with governments with questionable human rights records and potential challenges in complying with data privacy and anti-corruption laws.

“Essentially, what they're saying to investors is: Trust us. Yet they don't really provide a whole lot of information about how they're going to handle an enormous number of risks,” Michael Connor, executive director of Open MIC, a corporate accountability nonprofit that has also worked on shareholder campaigns targeting Amazon, Twitter, Facebook and Google, told me. 

Palantir acknowledges in its filing that criticism of how the company addresses political and social concerns is a risk factor for investors. 

But despite driving significant changes in how ICE operates, the company doesn't mention its contract once in its filing, as Alvaro Bedoya, director of Georgetown Law’s Center for Privacy and Technology, notes in Slate.

“If you're an investor who believes that corporate accountability and corporate governance are important to companies' long-term success, Palantir makes it very clear that you should look somewhere else,” Connor says.

Palantir has made clear it's not afraid of controversy, even as Silicon Valley companies make changes in face of activist pressure.

Palantir's chief executive Alex Karp said the company, which recently decamped from Silicon Valley to Denver, isn’t deterred by military and other controversial projects.

“Software projects with our nation’s defense and intelligence agencies, whose missions are to keep us safe, have become controversial, while companies built on advertising dollars are commonplace,” Karp wrote in a letter in the company's Securities and Exchange Commission filing. “The slogans and marketing of many of the Valley’s largest technology firms attempt to obscure this simple fact.”

Palantir's shareholder structure has also sparked concern from investor groups. 

Palantir – much like Facebook, where Palantir co-founder Thiel also sits on the board – concentrates voting power with its founders. The setup would make it impossible for investors to overrule the founders.

Several groups representing institutional investors, including the nonprofit Council of Institutional Investors which represents about $4 trillion in assets, raised concerns about this model. They say that the proposal flouts best practices for companies trying to attract institutional investors, such as hedge funds.

The group rebuked Karp for trying to distance the company from Silicon Valley while attempting to recreate its unbalanced power dynamics between founders and investors. Instead, the group urged Palantir in a letter earlier this month to include a provision that would ensure “proportionate voting rights” for stockholders within seven years.

Alex Karp, CEO of Palantir. (Thibault Camus/AP)

Investors will be watching closely tomorrow to see what valuation Palantir enters the market with, Dan Ives, an analyst with Wedbush Securities, tells me.

“Shareholder structure clearly factors in for investors, especially on the institutional side, but it's a balancing act between the valuation and the growth opportunities,” Ives said. “They are all ingredients in how investors chose to own or bypass a stock.”

Ives says that while many investors will see Palantir's human rights issues as a “contained risk,” they will be more concerned about if the company can deliver on its near-term promise to grow its business in the commercial sector. Right now, just shy of half of the company's revenue comes from government agencies worldwide.

Despite amassing more than half a billion dollars in contracts with U.S. government agencies including ICE, HHS and DOD over the past four years, Palantir acknowledges in its SEC filing that it has incurred losses since it was founded and it might not become profitable in the future.

A possible turnover in the White House combined with growing government scrutiny could further jeopardize its revenue streams.

Either way, Palantir will have to reckon with the pressures of increased transparency if it wants to succeed as a public company, Ives said. 

“It's been an enigma to many tech investors over the past decade because their technology is so unique, but it's been hard to see behind the curtains,” Ives said. “Now that they're going to the public, clearly transparency and openness will come with the territory.”

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