AFP, NEW YORK
Wall Street is licking its chops over an unprecedented slate of massive initial public offerings (IPOs) set to arrive in the coming months, beginning with Elon Musk’s Space Exploration Technologies Corp (SpaceX) next month.That is expected to be followed by artificial intelligence (AI) rivals OpenAI and Anthropic PBC. The trio of mega listings, each eyeing valuations around US$1 trillion or more, constitutes a heady period of elevated risk and reward.SpaceX is targeting an IPO that would raise up to US$80 billion — about double the funds generated from all IPOs last year.
The Wall Street sign at the New York Stock Exchange in New York City is pictured on March 9, 2020.
OpenAI and Anthropic are eyeing IPOs raising US$60 billion.“We’re really in unprecedented times,” PitchBook analyst Emily Zheng said. “And this concentration is more extreme than ever.”
The trio is poised to enter public markets as the Middle East war adds to inflationary pressures and fogs the geopolitical landscape.However, that factor is not expected to impede the arrival of SpaceX, OpenAI and Anthropic.“These three companies are kind of unique,” University of Florida specialist Jay Ritter said.Blueshirt Group managing partner Mark Roberts also expects the offerings to be well subscribed.“There’s enough capital to enthusiastically embrace these companies if they are priced correctly,” Roberts said. NASDAQ, where SpaceX is to be traded, announced earlier this spring that it would speed up the timeframe for including such mega listings in its main benchmark index.The shift is expected to prod additional stock purchases of SpaceX from investment funds built around the index.Among portfolio managers for larger funds, SpaceX “is probably viewed as a must-have stock,” Roberts said.In anticipation of the listings, there has been a throng of activity on secondary markets where investors are buying unlisted securities, pushing Anthropic’s theoretic value to more than US$1 trillion.OpenAI and Anthropic have warned investors against securities not authorized by the companies.Once they begin trading on public markets, their performance would serve as a gauge of the market’s appetite for additional offerings, particularly in the AI market.“If these companies do really well — especially the AI ones, like OpenAI and Anthropic — it would be a confirmation of these really massive private-market valuations,” Zheng said. “But the opposite could also be true,” she added. “If the companies don’t perform well, investors might conclude they’re overvalued.”Some investors who have backed the three heavyweights in private markets are poised to cash out, potentially positioning them for the next round of tech companies.Private equity firms hold more than 30,000 companies that they hope to exit, a backlog that has slowed availability of capital for new prospects. A Wall Street Journal article highlighted the slowdown, citing one firm that called the dynamic a “winter of exits.”A poor performance by the new entrants could hit the valuations of these private companies, Zheng said.By going public, the companies would also subject themselves to greater scrutiny from investors.The market would “be laser-focused on the performance of those stocks from an operational perspective,” Roberts said. “So they can’t miss their earnings.”Ritter predicted all three companies could see volatility.“There’s going to be big upswings and big downswings, because nobody knows the future,” he said. “Owning these stocks is not for the faint of heart.”
