YHK - yet another hacker news clone

The IPOs need to have buyers. The buyers will have some idea of the business valuation, as will the sellers. This is decided before the actual stock starts trading.

Specifically, the "underwriters" will go around finding people willing to buy what is being offered. This gives some idea of where it will begin to trade.

If your broker allocates you shares, you pay the IPO price as does everyone else who was allocated shares. The shares are all allocated before the IPO happens and once it opens for trading, price discovery happens.

How the price is set is another matter, one I’m not familiar with as an amateur.

The stock exchange is a "secondary market", which means you're buying stock from investors who own it, not from the company itself.

Most of the institutional and retail placements happen on the initial valuation. These are the people who are holding the shares when it gets listed and starts trading, and it is the primary source of raising capital through an IPO.

To go further though the Initial Valuation (usually a range) is set weeks before the IPO to make it easier to pitch to investors. And the final valuation is locked in the night before trading based on actual demand.

The opening price on the stock exchange, though, will be whatever the demand and supply is in pre-market trading/open.

Ultimately the percentage of shares that public will trade is material. say 20% for $100B is quite different from 10% for $100B.

If they are too far below the perceived value, they are leaving significant money on the table.

If they are too high, the institutions who participate in IPOs will let them know. If the price craters off IPO it is not good for perception of the stock, and so ongoing health of the company even if that maximizes private investor value at IPO.

So they build a book of commitment around the target value, trying to leave enough incentive (15-20%, often) of an initial bump to get big money in.

They get the money from the initial purchase of the shares, and never get another dime directly from the market again, unless they have another offering (which is quite possible). The stock price does drive leverage for later M&A and debt/credit activities, and matters to stock-based compensation, so it does have meaning, but the IPO provides a one-time cash infusion at the initial price.

If one of the initial buyers sells in the first minute the company is public the first publicly traded shares at 1.5x their purchase price, the company suddenly has a market cap of $1.5 trillion instead of $1 trillion, and that buyer has made a tidy 50% profit on the shares they just sold. If all initial buyers dump a bunch of their shares the price likely will go down, perhaps pushing the market cap to, say, $750 billion. Regardless of this action on the first day and after, the company offering their shares still has the $100 billion.

Note that initial buyers are discouraged from selling large portions of their shares.

If the pop is too big, that means the company left money on the table.

If the pop is too small, the investment banks that underwrite the IPO have to worry about losing money.

Since they actually have paying customers, it's a completely different sort of thing than for Meta. The question is instead whether they can keep at the frontier, whether the compute they've signed up for is good enough, etc.

Caveats: It's hard to believe that this growth rate would continue. And Meta's numbers above are trailing 12 months, while Anthropic's are annualized run rate.

That's why it's dropping here. When the actual stock market tanked yesterday institutional investors were like - hey wait a minute this is starting to look too expensive.

Also if your 401(k) is in index funds you are safe. A company is not added to indices right away. If you are in actively managed funds or something like that you might have more exposure risk.

So many people who don't actually read and evaluate things but just buy stocks based on vibes and what they see on Twitter. Which is to say, the same people that buy and lose money on most IPOs.

Scaled from 0 to $65 billion in revenue in 5 years...

Until there is a large free US model, its Ant and OAI.

You’re also missing the competition aspect. What if other companies have their own super genius slaves to sell at a cheaper price? What if open models allow anyone to have their own moderately genius slave at far less expense?

Whoever is claiming that is an idiot.

And if they haven’t created an artificial superintelligence then they start to look more like just another tech startup with no moat[1] and a terrible balance sheet.

[1] I don’t know about you, but I switch model providers multiple times per day.