Is Anthropic's mega IPO at risk over its $1.5 trillion valuation?

According to reports, some investors are seeking a lower valuation before committing to the offering, while others have raised concerns about whether the company can proceed with its planned listing

Anthropic's planned initial public offering (IPO), which could value the artificial intelligence company at $1.5 trillion, is reportedly facing uncertainty as major investors question its valuation following a sharp selloff in technology stocks.

 

According to a Wall Street Journal report, three major investors planning to participate in the IPO believe the proposed $1.5 trillion valuation may need to be reduced. One investor suggested that the company's valuation could fall closer to $1 trillion, the report said.

 

A Reuters report, citing four people familiar with investor discussions, said potential investors have questioned whether Anthropic can begin its planned roadshow next week and proceed with a November listing. Some consider the $1.5 trillion valuation to be at the upper end of expectations, the report said.

 

 

At the time of writing, Anthropic had not responded to these reports.

Will Anthropic delay its IPO?

Anthropic had been preparing to launch its IPO roadshow during the week beginning November 9, with share pricing expected the following week. The company is targeting a listing before the US Thanksgiving holiday.

 

The offering could raise as much as $100 billion, potentially making it the largest IPO in history. Anthropic had earlier been expected to surpass SpaceX's $86.2 billion offering in June.

 

However, the recent decline in AI-related stocks has raised questions about whether investors will commit to an offering of this size at the proposed valuation.

 

According to the Wall Street Journal, one prospective investor suggested that Anthropic could reduce the amount raised to approximately $80 billion. Another raised the possibility of postponing the IPO until market conditions improve.

 

Anthropic executives and advisers are expected to meet in the coming days to discuss the company's listing plans, the Journal reported, citing people familiar with the matter.

 

Reuters reported that investors may seek a larger valuation discount to commit to the offering, given Anthropic's quarterly losses and substantial financial commitments to its technology partners.

 

The company has not announced any change to its IPO timetable.

 

Anthropic filed for its IPO on October 26. Goldman Sachs and Morgan Stanley are leading the offering, with 20 other banks participating. The company's shares are expected to trade on the Nasdaq Global Select Market under the ticker symbol ANT. 

Technology stock selloff raises concerns over AI valuations

The uncertainty surrounding Anthropic's IPO follows a broad selloff in US technology stocks, adding to concerns about valuations across the AI sector.

 

Companies in the Nasdaq Composite lost approximately $2.5 trillion in market value on Thursday, following the US midterm elections.

 

The elections also saw political opposition to AI infrastructure development gain ground, with ballot measures restricting data centre development succeeding in several states.

 

More than 50 technology stocks in the S&P 1500 declined by at least 10 per cent during Thursday's trading session, Reuters reported. Retail investors also recorded their strongest selling activity since the Covid-19 pandemic, according to Vanda Research, as cited by Reuters.

Investors await October revenue figures

Apart from the proposed valuation, investors are also awaiting Anthropic's October revenue figures to assess its growth before committing to the offering.

 

According to Reuters, Anthropic left its October revenue figure blank in an updated S-1 filing with the US Securities and Exchange Commission (SEC). Two people familiar with investor discussions said the figure would help investors assess whether the company had accelerated growth following a slowdown in recent months.

 

The Wall Street Journal also reported that Anthropic's annualised revenue run rate exceeded $80 billion at the end of October, citing a person familiar with the matter.

 

The company's third-quarter revenue reached nearly $17 billion, compared with $1.4 billion in the corresponding period last year, according to its regulatory filing, as reported by Bloomberg.

 

However, lower prices for certain AI models and contractual discounts reduced third-quarter revenue growth by approximately $600 million, the report said.

 

The company has reduced prices for newer models, including Opus 5.5, amid competition from OpenAI and lower-cost AI models.

Anthropic reports $23.3 billion quarterly loss

Despite the increase in revenue, Anthropic reported a net loss of $23.3 billion for the three months ended September 30, compared with a loss of $12.1 billion in the same period last year, according to its SEC filing.

 

The latest quarterly loss included a $21.9 billion adjustment related to the fair value of convertible notes and other securities following an increase in the company's enterprise valuation.

 

Operating expenses rose 292 per cent year-on-year to $17.5 billion in the third quarter.

 

Anthropic also returned to an operating loss after reporting its first quarterly operating profit following at least five quarters of operating losses.

 

The company recorded an operating loss of $567 million in the September quarter, compared with an operating profit of $974 million in the preceding quarter.

 

According to Bloomberg, the third-quarter operating loss was primarily driven by $5 billion in computing costs under short-term commitments and $2 billion in non-cash charges associated with the company's charitable donation-matching programme.

 

Anthropic has also disclosed financial commitments exceeding $895 billion over the coming years, substantially all of which are related to computing capacity and infrastructure, according to its filing.

 

Of the total, approximately $448 billion is expected to be incurred by the end of 2030, while around $70 billion falls due during the 12 months ending September 2027. The company also added approximately $100 billion in commitments after September 30.

What happens next for Anthropic's IPO?

Despite the recent selloff, some investors remain interested in AI companies and expect demand for their shares to continue.

 

"It's not like these companies are not going to be a part of the future," Rick Meckler, partner at Cherry Lane Investments, told Reuters.

 

"They're going to become public. Investors are still going to have a lot of interest in them. Valuations have risen for a long time in the private market, and we'll probably see some pullback," he added.

 

Anthropic had previously been expected to pursue a valuation as high as $2 trillion, Reuters reported. More recently, investors had discussed valuations of around $1.4 trillion to $1.5 trillion, according to Bloomberg.

 

However, continued pressure on AI-related stocks could lead the company to postpone the offering until market conditions improve. The final valuation and investor commitments are yet to be determined, while Anthropic's IPO timetable remains unchanged publicly.