It might sound odd with trillions of dollars of combined market value set to join U.S. stock markets with expected SpaceX, OpenAI and Anthropic IPOs, but nervous investors are asking these tech titans to ‘show me the profits.’
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$3T in Market Value
According to LPL Financial (LPLA) estimates, the trio could add $3 trillion to the more than $69 trillion U.S. equity market. This would mark the largest wave of IPOs in history, but it would also be unprecedented because all three firms are losing money. There is little track record of sustained earnings from these tech tyros.
Investors, according to Reuters analysis, are beginning to ask what this all means for those getting set to take a stake.
“Once we move past that excitement stage where everybody wants to own it, it’s going to be really critical for these companies to show exactly what their profits are,” said Anthony Saglimbene, chief market strategist at Ameriprise (AMP).
Rodney Comegys, chief investment officer at Vanguard Capital Management, added: “History shows that not every early leader in a new technology ends up being a long-term winner, which is why diversified exposure remains important.”
Valuable and Unprofitable
Elon Musk’s space and AI firm SpaceX is targeting a $1.75 trillion valuation in a potential June listing. It would be the largest IPO ever. OpenAI is reportedly seeking a valuation of around $1 trillion and rival Anthropic was valued at $380 billion in a February funding round.
SpaceX, which is planning an IPO as early as June, posted a nearly $5 billion loss on more than $18.6 billion of revenue last year, according to excerpts of the company’s confidential registration statement reviewed by Reuters. OpenAI and rival Anthropic are in early-stage preparations for their IPOs and are also unprofitable, said the Reuters piece.
“Investors often latch onto a story where the potential growth is vast, and certain people might believe SpaceX has what it takes to go to infinity and beyond. While there is certainly a buzz around the company, there are also risks,” said Dan Coatsworth, head of markets at AJ Bell. “It is imperative that investors do not get carried away, and that they weigh up the pros and cons when considering any investments, even ones that sound so exciting.”
He said investors could take advantage if asset managers get too nervous post-IPO. “Retail investors might already be salivating at the prospect of buying stock, and there is a queue of index tracker funds waiting to invest following ‘fast entry’ changes to index qualification rules. However, there is also a large group of venture capital funds, asset managers and staff who may already be sitting on significant gains if the IPO goes well, and who might want to cash out quickly,” he said.
What Other IPOs are on the Way?
Let’s look at what other IPOs are on the way with our TipRanks IPO calendar.
