AI Giants: Valuation is Sprinting Towards the 10 Trillion Yuan Mark

According to media reports, just one day after disclosing its plan to list next week and releasing details of its IPO pricing, Anthropic's underwriters are already considering raising the IPO offering price amid strong investor subscription enthusiasm.

According to multiple people familiar with the matter, these underwriters have signaled that they expect to raise Anthropic's offering price above the $70-$78 range laid out in the Tuesday prospectus filing. This move is expected to push its fully diluted target valuation up to $1.5 trillion (equivalent to 10 trillion RMB) or even higher in the coming days.

Raising the offering price is also expected to push the total fundraising amount of this IPO above the $1 trillion mark. Three early investors of Anthropic said that the company's current priority is to raise as much capital as possible through the listing to support its huge spending on computing power infrastructure, rather than blindly pursuing the maximization of book valuation.

People familiar with the matter said that the underwriting team led by Goldman Sachs and Morgan Stanley has received strong investor subscription intentions since the roadshow kicked off on Tuesday, and is expected to push up the final offering price accordingly.

Documents made public by Anthropic on Tuesday show that the company plans to issue and sell a total of 825 million shares at a price of $70-$78 per share, with the maximum IPO financing scale of about $643.5 billion. If oversubscribed, the amount of funds raised can be increased by nearly another $100 billion through the "green shoe mechanism" (over-allotment option).

The company also announced that as part of this transaction, it will conduct a private placement financing, and Anthropic's strategic partners including Google, NVIDIA and Microsoft will collectively invest $260 billion in the company at the IPO price.

Calculated at the upper limit of the $78 per share offering price range announced on Tuesday, after the completion of Anthropic's IPO and private placement, its market capitalization based on the actual outstanding shares is about $1.02 trillion. However, if stock options, restricted stock units and other potential shares are included, its maximum fully diluted valuation is about $1.4 trillion.

Was the market too pessimistic before?

Anthropic launched an investor roadshow on Tuesday, and the company is expected to finalize the final IPO offering price on November 18 and start trading on the Nasdaq Global Select Market on November 19. Anthropic's listing comes at a highly sensitive time for financial markets — just a few days ago, the US midterm elections triggered a slump in tech stocks, wiping out as much as $3.2 trillion in market value in a single day, which left Wall Street in a state of panic.

Although the market later stabilized and rebounded, this sharp volatility highlighted how rapidly the market sentiment reversed, and highly leveraged operations multiplied the profit and loss fluctuations of many investment institutions. "In the current market environment, a weekend feels like a lifetime ago," a senior executive at a large investment institution sighed.

In recent weeks, as growing doubts have emerged over whether the artificial intelligence boom can last, Anthropic's investors have moderately lowered their previous expectation of hitting a $2 trillion IPO valuation. However, as Anthropic disclosed an IPO pricing range on Tuesday that may be more subdued than the market expected, some bullish sentiment has begun to emerge instead.

The company has recently been trying to dispel external concerns about whether its revenue can keep up with its planned spending of about $900 billion on computing power and infrastructure in the next few years. Anthropic revealed to investors that its annualized revenue in October reached $810 billion, and its revenue in the third quarter was $170 billion.

According to people familiar with the matter, Anthropic's main competitor OpenAI also told investors on Tuesday that its third-quarter revenue jumped 50% to reach $100 billion.

Analysts from Morningstar said that $1.7 trillion is Anthropic's "fair equity value", but Anthropic's valuation could fluctuate between $500 billion and $3 trillion, depending on the adoption rate of its tools, which reflects huge uncertainty over whether the AI boom can continue.

It is reported that some institutional investors that have been allocated IPO shares have begun to resell part of their shares to other buyers at a premium, which is exactly the same as the over-the-counter distribution transactions that emerged on the eve of SpaceX's listing in June this year.

On Tuesday, a broker in New York revealed that it is representing a venture capital institution to sell "up to $500 million" worth of Anthropic shares. According to transaction information seen by the media, the quoted price of these private shares is 4% higher than the final IPO offering price of this AI company.

Another venture capital group is selling $12.5 billion worth of Anthropic shares at a $1.5 trillion valuation through a special purpose vehicle (SPV). Early pre-listing investors can use such tools to hold and monetize part of their positions. Anthropic is currently trying to curb the use of SPVs and warned that the company will not recognize any offers issued by certain pre-IPO secondary market brokers.

This article is from the WeChat Official Account "CLS.cn", author: Xiaoxiang, published with authorization from 36Kr.