There's a line outside Anthropic's IPO, and the bankers want everyone to see it. Any nightclub owner knows the crowd outside says more about the door than the party.
Anthropic's (ANTH.PVT) offering has drawn multiple times the orders for the shares available, Bloomberg reported Wednesday, led by anchor-size orders. With a private placement, Anthropic and its co-founders are raising as much as about $90 billion at a targeted $1.4 trillion valuation, which would make it the biggest listing ever.
Saudi Aramco (2222.SR) drew nearly five times the shares on offer in 2019, or $119 billion of bids for a $26 billion sale. SpaceX (SPCX) pulled in more than $250 billion of demand for its June debut, about four times the deal. Facebook, now Meta (META), and Rivian (RIVN) had packed books too. Both were down roughly 40% to 70% a year after their first-day open, by Yahoo Finance calculations.
Most IPOs are heavily oversubscribed, which lets underwriters pick who gets shares, according to University of Florida professor Jay Ritter. Investors know it, so they pad their orders on hot deals, expecting them to be cut back in size. Plenty of that demand is often fast money looking for a quick flip.
That's why the first month of trading can mislead. "For the first 30 days you've got a pop with the IPO, but then after the lockup, that's when the market's actually going to give us the true valuation," Robert Schein, chief investment officer at Blanke Schein Wealth Management, told Yahoo Finance.
Still, the order book isn't worthless. It just speaks through the price.
Since 1980, US IPOs priced above their marketed range have gained 50% on day one on average, according to Ritter's data. Deals priced within the range averaged 12%, and those priced below it just 3%. Only about a quarter of deals clear that bar.
Anthropic set its $70-$78 range conservatively, and the Financial Times reported that bankers now expect to price above it, lifting the valuation to $1.5 trillion or more. Pricing is expected Nov. 18, with trading as soon as Nov. 19. When the bouncers start raising the cover charge, the crowd outside is real.
IPOs from 1980 to 2024 returned about 6% on average in their first year, compared with about 11% for similar-size companies. They trailed in four of their first five years. That's one reason four centuries of hot IPOs have rewarded patience more than speed.
There are exceptions. Arm (ARM) more than doubled in its first year after a deal that was more than 10 times oversubscribed. SpaceX opened at $150 in June and has spent long stretches below that price since.
"We saw this with SpaceX, where the IPO is the opening argument, but earnings deliver the actual evidence," Schein said.
Internal AI tools helped analyze interview transcripts, research, and draft this post. Humans reviewed, edited, and fact-checked this post before publication.
Jared Blikre is the global markets and data editor for Yahoo Finance. Follow him on X at @SPYJared or email him at [email protected].
