Anthropic’s tour sells the future of AI. Four centuries of hot IPOs show that the first deal is rarely the best.
The AI lab is asking for up to $1.4 trillion, at the top of its $70 to $78 range, counting all possible shares. Exchanges could begin as early as next week. Rival OpenAI (OPAI.PRV) may not be far behind: OpenAI President Greg Brockman said last week that the company could be ready to go public next year.
The story gives a warning to anyone considering buying from day one. The world’s first IPO, the Dutch East India Company, began trading in 1602. It took about three decades for its shares to double.
This year brought two new reminders. SpaceX (SPCX) opened at $150 in June, $15 above its IPO price, and soared about 40% in its first week. In August, it was in a hole of almost 30%. Five months later, SpaceX is still below its first trade.
Cerebras (CBRS) has had worse. The AI chipmaker opened at nearly double its IPO price of $185 in May. Its first close is always the best, and the stock now trades at about half of what buyers paid in the IPO.
The price problem
Anthropic’s growth is anything but typical. The turnover for the first nine months of the year was 13 times higher than the previous year. But investors are asked to pay for it. At $78 a share, Anthropic would trade at about 29 times its sales last year, according to Yahoo Finance calculations.
Jay Ritter, a professor at the University of Florida, has tracked more than 4,000 IPOs of companies with at least $100 million in sales since 1980. Those priced 20 to 40 times higher than sales gained about 3% on average over three years from their first close. The cheapest gained around 41%.
There is a positive point for Anthropic. IPOs of the largest companies, those with revenues exceeding $1 billion, have done about as well as the market.
A loud noise on the first day would make the calculations even worse. A jump of around 40% would push Anthropic past 40 times sales, where the IPOs would lose nearly half their value in three years.
That pop goes to anyone who buys at the IPO offering price, usually big Wall Street firms and their wealthy clients. It’s averaged nearly 20 percent since 1975, according to Ritter’s data, and everyone who buys after opening pays the price. This time, Anthropic is reserving up to a fifth of its shares for retail brokerages, including Schwab, Fidelity and Robinhood.
Other companies are rushing to sell their shares ahead of the deal, competing for the same investor dollars. “The Anthropic IPO is almost becoming this magnet where everyone is trying to raise cash in front of them,” Peachtree Creek Investments founder Conor Sen said on Yahoo Finance’s Market Hang in November.
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