Anthropic IPO is too big to fail

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Anthropic filed its amended registration statement with the SEC on Monday to begin the formal offering, and its public debut is shaping up to be the largest stock offering ever.

At the high end of the $70 to $78 range, the IPO would raise more than $64 billion in proceeds, or $74 billion assuming full exercise of the 15 percent over-allotment option (or greenshoe). With an additional $26 billion in foundational commitments from seven strategic investors, the total size could reach $100 billion.

We’ve never seen anything like it. The deal would break SpaceX’s $86 billion record since its IPO. If you want to get technical, you could argue that Anthropic’s IPO consists of the second largest IPO alongside a huge private placement. This will be a topic that financial historians can debate in future podcasts.

It’s also unclear how much Anthropic is actually worth at these levels. Based on the more than 13 billion shares outstanding, the market cap would be around $1 trillion, at $78 per share. But once you include stock options, restricted stock units and shares set aside for the charitable giving program, the share count rises to about 18 billion, meaning a market cap closer to $1.4 billion at the top. MainFT reported today that Anthropic may increase the valuation target to $1.5 billion or more in the coming days after receiving strong investor demand.

Differences between basic and fully diluted market capitalizations are expected for any growing company, but the significant gap highlights the volume of additional issuance to come. Regardless, comparing apples to apples (or GPUs to GPUs), the fully diluted $1.4 trillion figure compares to the $965 billion valuation Anthropic announced as part of a $65 billion fundraising round in May. This is a significant jump over the past six months, during which other AI-exposed names have seen mixed to mediocre performance in the equity and debt markets.

Whatever the uncertainties, the IPO appears to have generated enormous interest. Press reports indicated that the offer was covered on an “attributable” basis across the entire range. This choice of words is important: it means that once underwriters have reduced investors’ normally inflated orders, there is more than enough demand to place the entire amount, including the over-allotment option. This is a powerful and calculated message to convey.

Besides the jaw-dropping size, two features of the IPO stand out to me.

First, in some ways the size of the offering underestimates the number of shares introduced into the market. Only 23.6 million (or less than 3%) of the 825 million base offerings are sold by existing holders, with the rest of the profits going back to the company. But there is a secondary “phantom” offering, as non-founder insiders can sell up to 10% of their holdings on the first day.

That means as many as 316 million shares — worth nearly $25 billion at the high end — could be sold without any lock-ups, compared to a formal secondary offering of up to $1.8 billion. The “real” secondary could be nearly 15 times higher than what is announced. And the total supply of shares could be closer to 1.14 billion, despite the base size of 825 million. The additional 38 percent of shares will be paid whatever the available price and whenever the owner feels like selling. No underwriting syndicate office can decide where these shares go.

Let’s be clear: this is all fully disclosed (see page 318 of yesterday’s filing), and no one knows how much insiders will sell on day one. What is undeniable is that Anthropic can present the IPO as almost entirely primary (i.e. going to the company), while the pricing and allocation of much of the insider stock has shifted from bookbuilding – where the company and banks can exert control – to the secondary market, where anything can happen.

The second striking feature of this deal is the $26 billion cornerstone placement with AMD, Broadcom, Google, Micron, Microsoft, Nvidia and TSMC. These goliaths are not selfless parties; they are key providers of everything an AI lab needs, like chips, foundry capacity, cloud and compute. In some ways, their participation is a categorical vote of confidence in Anthropic’s activities; on the other hand, it reinforces the circularity of financing that many commentators have already identified in the AI ​​ecosystem.

Regardless, a successful Anthropic IPO suits these companies not only by supporting its future investment program (including $900 billion in purchase commitments disclosed in the previous filing), but also by validating their own stock valuations, which reflect Anthropic’s continued spending. In other words, the failure or withdrawal of an Anthropic IPO would have weighed heavily on their own valuations. In this regard, the fundamental installment is both a show of support and an exercise in self-help.

It’s worth noting that on the same day Anthropic announced its price range to launch the formal offering, shares of GE Vernova fell after SoftBank revised its U.S. data center project plans. If more delays and cancellations occur, spending will slow and suppliers will feel the consequences. And that doesn’t leave aside the question of whether the relationship between Nvidia CEO Jensen Huang and a Megaspeed executive could eventually burst the AI ​​bubble, as some claim.

Outside of Anthropic, the overall IPO market has struggled, with several high-profile offerings postponed in recent months. And even these highly anticipated mega-deals aren’t free money. SpaceX went public last June at an astonishing valuation, soared, fell, then came back, and its shares remain slightly above the IPO price.

It’s telling that even after lengthy “ground-testing” meetings with investors, Anthropic first markets its IPO with a price range. This is the market standard, but SpaceX launched its IPO at a fixed price of $135. There’s no doubt that a price below the peak will be seen as a disappointment, but Anthropic has given itself some wiggle room in case market conditions deteriorate between now and next week. The IPO will rely, at least to some extent, on price discovery and not a fixed take-it-or-leave-it price.

Anthropic’s IPO has significant momentum and support. But the extraordinary size of the offering, the potential influx of insider shares and the circularity of the fundamental commitments all raise questions about what will happen once the shares begin trading. The deal may be too big to fail for the companies involved. This does not necessarily mean that investors will be rewarded for their participation.