A wave of technology IPOs are coming to market. To what extent will they destabilise US markets?
- SpaceX, Anthropic and a wave of other AI companies are likely to come to market this year
- There is good and bad among the wave of issuance
- This is not the technology bubble 2.0, but could be disruptive
SpaceX and now Anthropic have released their IPOs plans. These are likely to be the biggest IPOs investors have ever seen, with multi-trillion-dollar valuations. They are likely to disrupt indices and, potentially, create a new generation of technology winners. However, during the technology bubble, hubristic IPOs were the straw that broke the camel’s back. Could history repeat itself?
There’s a lot of ambition in the SpaceX IPO. Few would bet against Elon Musk – his track record at Tesla shows he can make money for investors. However, there is plenty of blue-sky (or perhaps starry-eyed) thinking in the prospectus. There are plans to colonise Mars (and a hefty bonus for Musk if he succeeds), and to build data centres in space. Musk has ambitions to make life ‘multi-planetary’, extend “the light of consciousness to the stars” and use the sun “to power a truth-seeking artificial intelligence”.
The New York Times runs a ‘Elon Musk goals tracker’. It analysed the goals he has set during investor calls over the last 15 years – around 600 – and found that he has achieved around 19% of them. Many would argue that, given his ambition, 19% is still a good hit rate. However, the tracker also found that his success rate is slowing. “Of the 13 goals he declared in 2015, he later achieved nearly three-quarters of them. But of the 27 claims he made in 2020, fewer than half have been accomplished on time.”
Musk has made himself central to the whole SpaceX project. The governance structure makes it almost impossible for him to be fired. Only a majority of class B shareholders could remove him – and he currently owns over 90% of those shares. These are some chunky risks for investors who are being asked to pay $1.75 trillion for the privilege – that’s 113x 2025 revenues, according to Reuters data.
Anthropic has sought to be the ‘good guy’ of AI. It has leapfrogged its competitors. Its Claude tool has software providers quaking. OpenAI has been losing ground to Claude. Databricks, Stripe, and Anduril are other potential IPOs this year, while Alphabet has also sought to gatecrash, with an $85bn fund raise.
There are some real nuggets in among this IPO wave. The worry is that investors end up with a lot of slop as well. Some will argue that doesn’t matter very much – the wins from the winners will outpace the losses from the losers. Yet there may not be infinite demand. The reaction to Alphabet’s decision to raise capital suggests support could be finite.
These IPOs could be the next generation of technology leaders, but it is not guaranteed. This is not the technology bubble 2.0 – companies at least have revenues. However, this IPO wave has the potential to disrupt the current technology bull run.
