How Mega IPOs Like Anthropic and SpaceX are Changing the Market Playbook
The New Dynamics of Mega IPO Listings and Index Inclusions
By Vidya Ranganathan
LONDON, Nov 12 (Reuters) - When AI firm Anthropic starts trading after its expected IPO next week, its share price in the first few weeks will largely be determined by who is forced to buy it rather than who wants to buy it. And investors are examining SpaceX's successful June stock market debut for clues.
SpaceX’s Influence on IPO Strategies
Elon Musk's SpaceX altered the playbook for stock-market listing by behemoths, as major US index providers such as Nasdaq rewrote the rules around inclusion, ensuring a massive pool of passive money would buy the shares in the first 15 days of its listing.
Investors expect the same dynamic with Anthropic. The Claude chatbot creator aims to raise up to $64.4 billion by selling 825 million shares priced between $70 and $78 each, valuing the firm at up to $1.4 trillion.
Accelerated Index Inclusion
In the past, major index providers generally did not add companies to their benchmarks until weeks or months following their debut. Like SpaceX, Anthropic will be added to at least six big indexes, including FTSE's USA index, the S&P Total Market Index and the Nasdaq 100, within 5 to 15 days of its listing.
"Anthropic is a mirror image of the SpaceX IPO. In that regard, it has the same index-related drivers over the first 15 days of trading," said Carsten Hesse, London-based head of index events at Berenberg.
Passive Demand and Pre-Positioning
London-based index rebalance analytics firm Intropic estimates passive demand from index-tracking funds will account for about 28% of Anthropic's shares offered, or roughly $19 billion. Index-rebalancing funds and hedge funds will bid on shares to pre-position for this expected passive demand.
SpaceX earmarked a fifth of its $75 billion offering, which valued the firm at nearly $1.75 trillion, for retail investors, more than double the standard. Anthropic is doing the same.
Index funds and retail investors lapped up nearly half the SpaceX shares sold, alongside other fund managers positioning for that demand. That created upward momentum for the fraction of outstanding shares that were initially sold publicly.
Similarly, a mere 6% or so of Anthropic's outstanding shares are being offered at the IPO
Early Trading Patterns and Speculation
Both SpaceX and South Korean firm SK Hynix, which listed on Nasdaq in July, saw a big pop in their shares on the third day of trading, which is when stock-option trading began and speculators in those derivatives hedged their bets by buying shares.
Anthropic shares will see similar early buying, analysts said.
"You don't wait till day 5, day 10, day 15, when you see the implementation of the index upgrades or inclusions," said Hesse. "As we've seen with SpaceX, people are buying early."
Game-Changer for Index Trades
Price Momentum and Lock-Up Expirations
By day 3, SpaceX shares were up 50% from their opening-day debut at $150 a share, and remained well above the $135 IPO sale price for the first 15 days. Following that, they drifted lower as investors braced for the first of a series of lock-up expirations, when employees and other pre-IPO backers are cleared to sell shares.
Ruben Pathmanathan, equity analyst at Intropic, said the price-inelastic demand helped drive momentum.
Blueprint for Future IPOs
“What makes SpaceX a potential blueprint is how several market forces came together around the listing: index inclusion, passive demand and a tightly held float. Together, they shaped how the shares were priced and how they traded in the early days," he said.
Anthropic's trajectory could be slightly different, as it is allowing employees who own roughly 15% of its equity to sell some shares on the first day.
Anthropic is also raising $26 billion via a separate private sale with cornerstone investors, including Alphabet's Google, Nvidia and Advanced Micro Devices. Those shares do not have a lock-up.
Impact on Index Rebalancing Funds
The new index rules and massive flows have been a game-changer for funds that profit from index rebalancing trades.
"It's a bit of an evolution of the market," said Brian Hartigan, global head of ETFs and index investments at Invesco, referring to the novelty of such large issues that have massive private stakes built before they've gone public.
Index rebalancing trades have traditionally been constrained by the size of the IPO, with too many funds trying to front-run limited passive demand. That is less of an issue for giant IPO sales.
"This is the type of opportunity that the arbitrage community likes because the risk of overcrowding is more limited," said Celia Fseil, head of equity market neutral strategy at Candriam.
Two teams trading index changes at Millennium Management made $3.7 billion in June, Bloomberg reported. Millennium would not confirm the report.
"If you're in index rebalancing, these are probably the events of a lifetime," said Bill Park, CIO of Connecticut-based Altisma Capital Management.
(Reporting by Vidya Ranganathan; editing by David Gaffen)
