Hi Traders.
Three weeks ago I told you I tried to buy Anthropic at a $380 billion valuation and couldn't find a door I trusted.
Since then, Reuters reported the listing has slid toward mid-October, and the prospectus should go public any day. The whisper number (the valuation insiders float before anything's official) sits at $2 trillion, and some reports put the raise itself as high as $100 billion.
I wrote almost this exact editorial about SpaceX in June. I'm writing it again because it's turning into a theme, and I don't like where it's going.
The Price of Admission in 1980
A young company needs money to grow, so it comes to the public market and sells a real chunk of itself. The public shares in the risk and the reward. That's the whole reason capital markets exist: you find the companies you believe in, get behind them early and ride it.
Apple (AAPL) went public in 1980 at under $2 billion. Microsoft (MSFT) listed in 1986 at under $1 billion, and Nvidia (NVDA) came public in 1999 at around $600 million. Google was the big one in 2004 at about $23 billion, and people thought that was rich.
Every one of those grew into a multi-trillion-dollar company, and the public got to ride along for almost the entire trip.
Anthropic is five years old. In March 2024 it was worth $18 billion. About two years later, in May of this year, its latest private funding round closed at $965 billion.
It ran more than 50x without a single public investor in the room. Price the IPO at the whisper, and the public gets its invitation after a 100x run.
Who's Selling at $2 Trillion?
I get why this happens. The private market's enormous now, and these companies don't need our money. Sovereign wealth funds, Amazon (AMZN), Google, Nvidia and Microsoft all write the checks, and half the time the money circles right back as cloud contracts and chip orders.
So the early investors hold on longer. Why sell at $60 billion when you can hold to $965 billion? Why list at $965 billion when the banks can build a book (line up orders from big investors) at $2 trillion?
By the time a company like this reaches an exchange, the IPO mostly works as a liquidity event (a chance for insiders to cash out) for the people who took the real risk early. I don't begrudge them.
But somebody has to buy at $2 trillion, and they're looking at us.
A friend asked me a question I keep coming back to. There used to be value in an IPO, so where's the value in a $2 trillion company?
Personally, I love Claude. I use it every day. It's still a young company, and I'd love to own a piece of it.
But they're asking me to buy at the end of the discovery phase, at a price built for perfection. I'd carry all the risk and collect none of the early reward. At that price, I'd just be underwriting somebody else's exit.
If You Can't Join Them, Beat Them
SpaceX (SPCX) priced at $135 and started trading June 12. By its third session it touched $225.
About a month later it slipped back under its IPO price, and on August 3 it printed a low near $105. That's less than two months after the biggest IPO in history.
Nothing about the company or its story changed in that stretch. Stocks priced for perfection have hiccups, and traders sell every one of them.
Anthropic will have hiccups too. Some quarter, compute costs will jump, or a rival will ship a model with cheaper tokens. The stock will take a hit, and maybe then it trades at a price with some reward attached.
I'm not clamoring to pay this valuation right out of the gate.
A whole web of public companies runs through this listing: Amazon, Alphabet (GOOGL), Nvidia, Microsoft, AMD (AMD) and a dozen more. Every one of them has a real bid and ask (the prices buyers and sellers post) on an exchange I understand. For the 90 days around this IPO, money's going to move through all of them, fast and in both directions.
I'd rather trade the companies around this IPO than buy the IPO itself.
Mark ran this exact playbook through the SpaceX lifecycle, and he's running it again now. He's traded around big events for a long time and he's good at it, which is why I'm following along with him as Anthropic comes to market.
Enjoy the Journey,
Tim