Hey Traders,
On May 18th, 2012, Bloomberg called me.
They wanted me to come to their offices for an interview.
That was a little strange, because I did most of my Bloomberg hits from the floor of the CME, not from their Chicago office.
The office was a couple of blocks from ours, so I said sure.
It was my first interview in that building. The atmosphere felt different. Floor interviews meant working with the CME production crew and shooting the breeze with whatever traders were hanging around the studio.
This office was full of Bloomberg employees, not traders.
I remember the date so vividly because it was the day Meta Platforms (META), then called Facebook, went public. It was the first U.S. company to list at a market cap north of $100 billion, so there was a lot of buzz around it.
The Bloomberg employees were especially excited, because they knew the product cold. Remember, this was before TikTok, and Facebook had announced the Instagram deal barely a month earlier. It had just finished putting MySpace out to pasture, and it was the KING of social media.
One conversation with a producer sticks with me: He asked me how high I thought Facebook would go.
You should have seen the kid's face when I told him it wasn't going up.
It was going to drop.
He looked at me like I'd insulted his mother. “How is that possible?” he asked. This company is the biggest thing on the internet.
What I told him is important because it relates 1,000% to Anthropic’s upcoming IPO.
IPOs are almost always overpriced when they first launch, and I pointed to the pile of dotcom IPOs from the previous 10 years.
Before an IPO, all the public talk is about what a stock might become, not what it is. At the time, Facebook had $3.7 billion in annual revenue and earned 46 cents a share. At $38 that was more than 80x earnings, and a lot of that risk showed up if you look at Facebook as a standalone platform.
Facebook hasn't gone the way of MySpace, but its user base skews older every year. Zuck, for all his mistakes of late, was brilliant to buy Instagram.
Back to my story.
Facebook listed, closed the first day 23 cents above the $38 IPO price, then rolled over and bottomed under $18 with a valuation below $50 billion.
It didn't take out its IPO-day high until September 2013, almost 16 months later.
I ran into that producer a few weeks after the IPO, and he asked me where I'd buy Facebook. Below 20, I told him.
Here's my point: IPOs can feel incredibly exciting and pull you in, but in the near term they're almost always doomed.
Understanding the IPO cycle ahead of Anthropic and OpenAI, two of the biggest listings we'll ever see, is going to be invaluable over the coming months.
Anthropic is on track to price first, likely in October, with OpenAI behind it.
Your only option,
Mark Sebastian