Palantir Unveils Partnership With Waste-Industry Software Provider Rubicon

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The data analytics giant

Palantir Technologies

is moving into crunching numbers on trash.

Palantir

(ticker: PLTR) announced a partnership Thursday with Rubicon Technologies, a relatively new software and solutions provider to the waste and recycling industry.

Rubicon wants to be the operating system for the waste industry, providing haulers with software and connectivity solutions to help make them more efficient, as well as data-collection products for cities and companies generating garbage.

Rubicon believes the waste industry has too much, well, waste and is ripe for disruption. The relationship with Palantir enhances Rubicon’s data analytics capabilities, which eventually will help save waste generators and haulers money, it said. Palantir will also help Rubicon commercialize some of its products.

“Data has been at the center of the Rubicon story since our company’s founding, and the application of data to business processes is what has enabled us to consistently drive environmental innovation in the waste and recycling category,” said Rubicon CEO Nate Morris in the companies’ news release.

Rubicon isn’t a public company yet. It is merging with the special-purpose acquisition company

Founder SPAC

(FOUN) to raise additional capital. When the merger is complete, the combined company will trade under the stock symbol “RBT.” The deal will raise as much as $432 million in cash for Rubicon, according to the company.

Founder stock was up about 0.3% in late trading Thursday. The S&P 500 and

Dow Jones Industrial Average
were up 2.2% and 1.9%, respectively.

The stock might not be up more because it has been doing fine, relatively speaking. Coming into Thursday trading and since the merger was announced in mid-December, Founder stock, which will become Rubicon, was up about 1%. That isn’t bad, given that the S&P and

Nasdaq Composite
were down about 15% and 25%, respectively, over the same span. The

Defiance Next Gen SPAC Derived ETF
(SPAK) had fallen 32%.

Founder stock may have held up better than other stocks and SPAC shares because Rubicon has sales and is more modestly valued than other software companies. Rubicon, the company being acquired, generated $583 million in 2021 and expects to generate about $736 million in 2022. That’s about 26% year over year growth. It generates gross profits, but not operating profit just yet.

The transaction values Rubicon stock at about $2 billion based on about 199 million shares outstanding when the deal closes. That is expected to happen in the second quarter of 2022 .

Shares of the combined company trade for, very roughly, three times Rubicon’s sales. Software companies in the S&P 500 trade for closer to nine times sales, although those in the market benchmark have a better mix of growth and profit margins.

The software components of the S&P 500 have been growing sales at roughly 14% a year on average for the past three years. Operating profit margins are about 34% for the group. Of course, software companies in the S&P 500 are mature and include companies such as

Salesforce

(CRM) that generate tens of billions in annual sales.

The Palantir relationship is designed to enhance Rubicon’s offerings. That could mean even faster sales growth for investors.

Coming into Thursday trading, Palantir stock was off about 56% year to date. Shares are up 4.3% in late trading.

Write to Al Root at [email protected]