Anthropic‘s Anticipated Public Offering
The artificial intelligence company Anthropic is preparing for a public listing, with trading potentially beginning as early as next week. The company is reportedly seeking funding for an estimated total value of $1.4 trillion, based on a preliminary share price range of $70 to $78, accounting for all potential shares. Anthropic’s development efforts are fueling significant interest in the AI sector.
Rival firms are also preparing for market debuts. For instance, OpenAI President Greg Brockman stated last week that his company could be ready to go public sometime next year.
A History of Initial Public Offerings
Market history suggests that the initial trade price of an IPO is often not the optimal purchase point. The world’s first IPO, issued by the Dutch East India Company, commenced trading in 1602. Over the following decades, the stock required approximately three decades to double in value.
Recent market cycles have provided stark reminders of this volatility. SpaceX (SPCX) launched in June with an IPO price of $150, which was $15 above the stated offering price. Although the stock surged about 40% during its first week, by August, its value had dropped nearly 30% below its IPO level. To date, SpaceX remains below its initial trading price.
Another example is AlphaSpace Cerebras (CBRS), an AI chipmaker. This company opened in May at a price nearly double its $185 IPO cost. Currently, the stock trades at roughly half of what initial purchasers paid.
Valuation Metrics and Expert Analysis
Anthropic’s growth trajectory is significant, noting that its revenue during the first nine months of the year was 13 times higher than the preceding year. However, investors are being asked to pay a premium for this growth. At a share price of $78, Anthropic would be valued at approximately 29 times its sales over the past year, according to Yahoo Finance calculations.
Analysis of historical data by University of Florida professor Jay Ritter, who tracked over 4,000 IPOs of companies generating at least $100 million in sales since 1980, shows varying outcomes. Companies priced at 20 to 40 times their sales saw an average gain of about 3% over three years from their initial close. Conversely, those priced lower gained approximately 41%.
Market experts caution that while IPOs for the largest companies—those with over $1 billion in sales—tended to perform similarly to the overall market, a substantial first-day increase could be problematic. A jump of around 40% would push Anthropic’s valuation past 40 times sales, a level where historical IPOs have seen their value diminish by nearly half over three years.
Investor Dynamics and Expert Views
The initial surge in stock price tends to benefit those who purchase shares at the IPO offering price, typically large Wall Street firms and their affluent clientele. Ritter’s data indicates that this initial pop has averaged close to 20% since 1975, while retail investors buying after the opening are often left paying the cost of that pop. For Anthropic, up to one-fifth of its shares are being allocated to retail brokers, including Schwab, Fidelity, and Robinhood.
“The Anthropic IPO is almost becoming this magnet where everybody’s trying to raise liquidity in front of them,” said Conor Sen, founder of Peachtree Creek Investments, during a discussion on Yahoo Finance’s Market Hang in November.
Dan Niles of Niles Investment Management offered a broader historical perspective, recalling the dot-com bust. He noted that the S&P 500 staged seven rallies during its decline. Niles stated:
You’d be like, wow, it’s a great time to invest. Except you would have lost 49% of your money because that’s the tech bubble.
