The shares of Palantir (PLTR, Financial) decreased 11% on Thursday morning after CEO Alex Karp presented a new stock trading strategy while fears grew about potential military budget reductions. According to an SEC filing, Karp plans to sell between 48.9 million company shares, which represent $1.23 billion worth of stock, to create liquidity options for Palantir Technologies. The investment bank Wedbush stands behind Palantir despite its current market uncertainties because the company presents strong future opportunities.
At the same time, these proposed defense cuts add another layer of uncertainty that could undermine the government spending crucial to Palantir’s core operations. Defense Secretary Pete Hegseth has instructed the military to perform annual budget reductions by 8% throughout five years. Submarine and drone projects will remain untouched, but defense budget cuts affect essential components, including IT, which form the foundation of Palantir operations. Research analysts project that proposed budget reductions will undermine Palantir’s future service needs, thus weakening financial performance and devaluing investor value.
This article first appeared on GuruFocus.
