It’s always exciting when a big initial public offering comes down the pike, and now it looks like we could see one of the biggest ones in history soon. Anthropic (ANT), the company behind the Claude AI chatbot, filed its IPO prospectus with the Securities and Exchange Commission (SEC) on Oct. 26 and is reportedly targeting a range between $1.5 trillion and $2 trillion.
Judging by the excitement surrounding other major technology offerings this year, Anthropic could attract plenty of attention when its shares begin trading. But getting excited about an IPO and making money from one are two very different things.
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Fortunately, investors have several ways to gain exposure to Anthropic without chasing its stock on opening day. Some of those opportunities are already available.
SpaceX Offers a Warning About IPO Excitement
Remember the excitement surrounding the SpaceX (SPCX) IPO in June?
The Elon Musk-led company priced its shares at $135 for its June 12 debut. But by the time regular investors could buy shares on the Nasdaq, the stock opened at $150. Within days, SpaceX had surged past $200.
That's a terrific outcome for investors who received shares at the offering price. For those who bought during the initial frenzy? Not so much.
SpaceX has since surrendered much of those early gains and is currently trading below its $150 opening price. If you were an investor who bought in those early days, you’re probably sitting on massive losses. And if you waited, you have had plenty of opportunities to buy at a lower price.
There's no guarantee Anthropic will follow the same path. But the example illustrates why buying a highly anticipated IPO immediately can be a dangerous strategy. The price investors pay matters, even when they're buying an outstanding business.
www.barchart.com Some Technology Giants Already Own Anthropic
Here's something investors might overlook: They may already have exposure to Anthropic through stocks they own.
Anthropic's IPO prospectus confirms that Amazon (AMZN), Alphabet (GOOG) (GOOGL), and Microsoft (MSFT) have made significant equity investments in the company through their affiliates.
Amazon has been particularly aggressive. Its relationship with Anthropic includes billions of dollars in financing and a major cloud computing partnership through Amazon Web Services (AWS).
Alphabet also has substantial financial commitments to Anthropic. The prospectus reveals that Google has an option to purchase up to $10 billion in additional Anthropic shares at the IPO price, potentially expanding its ownership position.
Microsoft has invested in Anthropic as well, while also providing cloud infrastructure through Azure.
These relationships give all three companies a financial interest in Anthropic's success. If its valuation climbs after going public, their investments could become more valuable. But here’s the most important thing—if you own sizable investments in those big tech companies, you already have some indirect exposure to Anthropic.
Just realize that even a sizable gain in their Anthropic investments might have a relatively modest impact on their overall valuations.
Funds Offer More Direct Anthropic Exposure
Investors looking for something closer to a pure Anthropic investment have another option: funds that already own shares in the private company. And these are funds that you can buy right away—you don’t need to wait for Anthropic’s shares to hit the open market.
The ARK Venture Fund (ARKVX) has a reported 4.41% portfolio weighting in Anthropic. Managed by Cathie Wood's ARK Invest, the fund owns a mixture of private and publicly traded growth companies.
www.barchart.com However, ARKVX isn't a conventional exchange-traded fund (ETF). It's an interval fund, meaning investors face restrictions on when and how much of their investment they can redeem. Its net expense ratio is also 2.90%.
The Destiny Tech100 (DXYZ) offers substantially greater exposure. Anthropic represented 14.4% of its portfolio as of June 30, making it the fund's largest reported individual holding.
DXYZ trades on the New York Stock Exchange, making it accessible through ordinary brokerage accounts. But because it's a closed-end fund, its shares can trade at a substantial premium or discount to the value of its underlying investments.
Investors need to pay attention to that difference. Paying too much for DXYZ could erase some of the benefit of getting early exposure to Anthropic.
Finally, the KraneShares Public-Private AI & Technology ETF (AGIX) provides another alternative. Anthropic represented 2.26% of the ETF's assets as of Oct. 28.
AGIX also holds established technology companies, including Microsoft, Alphabet, and Amazon. Its 1% annual expense ratio is considerably lower than ARKVX's, although its direct Anthropic exposure is smaller.
What’s the Best Way to Invest Ahead of the Anthropic IPO?
For most investors, the smartest approach is to resist the temptation to chase Anthropic immediately after its public debut. I would rather have indirect exposure through Amazon, Alphabet, Microsoft, or one of the above funds than buy Anthropic stock in the first few days of its offering.
If Anthropic follows SpaceX's example by soaring initially before surrendering those gains, investors who keep some cash available may eventually get an opportunity to buy shares at a more attractive price.
On the date of publication, Patrick Sanders did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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