Key Points
-
The developer of the Claude large language model filed its public registration statement (S-1) on Oct. 26, starting the clock on its initial public offering (IPO).
-
Since May 2012, tech-focused IPOs have a track record of face-planting not long after their debut.
-
Game-changing technologies and bubble-bursting events have gone hand in hand for decades.
-
Anthropic’s staggered and accelerated insider share lockup period is terrible news for retail investors.
-
Roughly five months ago, on June 12, Elon Musk’s Space Exploration Technologies (NASDAQ:SPCX) shattered Wall Street’s record books with the largest initial public offering (IPO) in history. In a matter of weeks, the developer of the Claude large language model (LLM), Anthropic (Nasdaq: ANT), may boot SpaceX from the pedestal it claimed.
On Oct. 26, Anthropic filed its long-awaited public prospectus (S-1), providing investors with hundreds of pages concerning its operating performance, balance sheet, and risk factors. It also started the clock on its public debut, which is expected before the Thanksgiving Day holiday.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
While the table is set for Anthropic to be the most-hyped IPO in Wall Street’s storied history, I have four predominantly history-backed reasons why I won’t be touching it with a 10-foot pole.
Hot tech IPOs often struggle
Though no one denies what a game changer Claude has been among LLMs, more than 14 years of history show that tech-focused IPOs commonly face-plant after their debuts.
According to Truist Financial (NYSE:TFC), which examined the time-based performance of 30 of the most hyped tech-centric IPOs since May 2012 (not including SpaceX), just 43% were higher after one year. More importantly, the average year-one maximum drawdown for these IPOs is 55%.
In other words, the retail investor hype that often launched these stocks out of the starting gate quickly faded.
The valuation doesn’t make sense
Secondly, Anthropic will likely be priced for perfection, assuming a market value of $1.5 trillion to $2 trillion.
Over the trailing 12 months (TTM), Anthropic generated about $19.7 billion in sales, putting it on track to sport a TTM price-to-sales (P/S) ratio of between 76 and 102. History tells us that a TTM P/S ratio above 30 has consistently been indicative of a bubble. It’s the arbitrary line in the sand that frequently marked a top for internet stocks in the late 1990s and early 2000s.
No matter how the numbers are approached, Anthropic’s valuation appears far too aggressive.
Image source: Getty Images.
Game-changing technology bubbles have always burst
Building on the previous point, no game-changing technological innovation since (and including) the advent and proliferation of the internet in the mid-1990s has avoided an early-stage bubble-bursting event.
Bubbles continue to form and subsequently burst around hyped innovations because of the overzealousness of retail investors. For over three decades, they’ve been overestimating the pace of adoption and/or optimization of new technologies, including the internet, 3D printing, blockchain technology, and the metaverse.
While enterprise AI hardware and LLM adoption have been insatiable, optimizing AI solutions to maximize sales and profits will take several years. This leaves the door wide open for an AI bubble-bursting event.
Insiders can fleece retail investors
Lastly, Anthropic’s prospectus outlined a staggered and accelerated share lockup period that, in my view, allows insiders to completely fleece retail investors.
Typically, newly public companies prevent their insiders (high-ranking executives, board members, and early investors) from selling shares for the first 180 calendar days after the IPO. This ensures that insiders don’t take advantage of early retail investor hype.
Anthropic’s prospectus laid out 23 separate insider share-unlock events, including one on the company’s debut day! We’re about to witness one of the greatest wealth transfers in Wall Street’s storied history, with insiders making bank and retail investors left holding the bag.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again
In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. If you’d invested $5,000 then, you’d be sitting on $2,686,757 today.*
Now, for the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. It’s a key player in the $1.8 trillion space race, and with the stock recently sitting 20% off its highs, the window to get in early is closing fast.
Continue »
*Stock Advisor returns as of November 5, 2026.
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Truist Financial. The Motley Fool has a disclosure policy.
