Anthropic has a great product, but what's going on in the stock market is astonishing. Companies waiting to be valued at a trillion dollars before going public? (I'm writing this comment with the assumption that they will go public soon and the valuation will be higher than this $965 billion dollar private valuation) The stock market used to be a place for companies to raise money from investors. But that isn't what it is anymore, it's a dumping ground. Venture capitalists & private investors are sucking all of the possible growth and future upside from these companies and then dumping them on retail investors when there's nothing left. There is no growth or upside left by the time these companies go public. If you invest in these IPOs you are buying the absolute peak with all potential future profits baked into the price, with nowhere left to go but down.
Yeup, no shortage of tech IPOs over the past five years that are now valued at like 5% of what they were after being dumped onto the market: ZoomInfo, Bumble, Gemini
And many more that are 50% of what they were: Snowflake, Coinbase
And many more that went back to private companies and then were sold off: Carbon Black, etc...
I'm actually too lazy to go list out all of them.
But employees, beware, of those gnarly lockup periods post IPO where all the better classed options than yours get to exit.
Coinbase wasn't an IPO, they didn't create any new shares to sell as part of going public. They did a DPO, Direct Public Offering where they listed the existing private shares publicly and allowed most shareholders to sell immediately from day one. It was a great way to make the founders rich, VC to cash out their initial investment, and... well mostly just that.
... still, "on average" IPOs tend to make money, no? that's why people (fight to be able) to buy them.
this gives a nice comfy exit to many late-stage investors, etc.
and, of course, it's hard to say that it's great that these companies are mere shadows of themselves post-IPO, but also it's impossible to non-misleadingly assess each IPO as if they were in a vacuum.
obviously Coinbase is/was a stupid venture, but at the same time it was a pretty good bet at the time. and the same stands for a lot of these.
> Approximately 56% to 60% of U.S. initial public offerings (IPOs) lose absolute value over a five-year period. Historically, the median IPO stock has lost roughly 41% of its value five years after its first day of trading.
I remember seeing a video about this subject, since large IPOs are automatically included in index funds it is kinda of a way to extract value from passive investors. Insiders cash out before it hits the indexes, index crashes by a fraction for a %, all pensions in the country (and many overseas) pay for it.
But with OpenAI and SpaceX IPOing roughly at the same time it will likely be more than fraction of a % in this/next year.
> since large IPOs are automatically included in index funds
No, this was not allowed. Until a certain someone with deep connections to the corrupt government (coughspacexcough) changed the rules for themselves for the upcoming IPO. It's going to be.... ballistic.
but also, getting IPOs included captures the upside.
of course, public markets nowadays are definitely paying a pretty serious "agent-principal premium". (since public exits are usually very good for the C-suite and for all those vested stocks.)
so yeah, it seems it would make sense to buy the post-IPO dip, but then you would need to have some kind of formula for that, and ... that seems ripe for gaming by speculators ... so all in all, it's just more efficient to do what the rule of the index says. (and of course there's already speculation at the discontinuity.)
sure, but does that risk have good returns to go along? if IPOs are known to be very bad bets why do institutions (supposedly savvy professional investors) participate?
Because they (should) have sophisticated risk models that account for the long tail. If even a few ipos become Google or Facebook, the risk is worth it. But for average retail investors ipo participation will be bag holding exercise. That said betting your conviction is one of the only ways to beat the market, even if it comes with additional risk (emotional+intellectual attachments). If you really believe in ai or space exploration, the upcoming ipos represent an opportunity to bet on your beliefs and predictive capability
you mean that if average Retail Ronnie directly buys the new hot stock at IPO versus getting exposure to it through whatever ETF they have?
yes, directly buying a stock at IPO sounds really strange for me. (because either you know it's undervalued, but then it's insider trading. if not, then why compete with irrational fanatics?)
I think index funds are a big reason for this change, as many of these stocks are now guaranteed to be bought by a huge chunk of the market, making it much easier for them to become bag holders.
Lots of professional investors are passing on the SpaceX IPO for example, which is why they had to increase the share of the retail investors.
Often only minimal shares are floated on the public market - 5-10% now is not unusual. Also, founders keep priority shares to keep the company.
So IPO is not particularly a liquidity event for investors as much as a valuation/pricing event. Indeed, the tech IPO's that have done the worst were the ones where shareholders wanted liquidity.
Clearly none of the multi-trillion dollar companies could find a buyer now if they really needed to sell themselves, so they're not really "worth" that much. (Nor are their founders, who can't sell their shares without tanking the stock.)
So these stocks are more like derivatives: a way to bet on the future where betting volume is huge relative to the underlying asset.
2. Shit goes to 0. Your 401(k) invested into S&P 500 takes a dive (dump phase)
3. Retail holding bags (full of shit) phase.
Case study: Tesla, with a P/E ratio in the hundreds along with declining sales and TAM, is a part of the S&P 500 and, consequently, of many people's 401(k)s.
Well... in normal times they would be entering at the bottom of the index due to the company beginning to grow, the purchase of which is being funded by a firm exiting the index due to shrinking, so assuming you have bought and held units in the fund, most of the time an index fund is buying low and selling low.
And then when you sell your units, hopefully in aggregate the index is worth more than it was when you entered...
Looking back it feels like GOOG, FB, TSLA etc. all went IPO at reasonable valuations. Retail & public investors did benefit long term and continuing to get higher valuations in public is not a small feat compared to a VC valuation.
A trillion dollar valuation seemed so hard back in the day and now there are so many companies in that list. What's the next level?
Is this just signs that $ is no longer the inflating at the same rate over time and its the realistic inflation that is reflecting in the stock market?
Prices of all goods surely has to follow to make up for the revenue needed to sustain these valuations and also the salaries to sustain the prices.
Unfortunately, those who are not in the loop is not going to have a good time.
> Looking back it feels like GOOG, FB, TSLA etc. all went IPO at reasonable valuations
Yeah, looking back. At the time, I distinctly remember people were going batshit over the insane FB valuation. It wasn't at all obvious it was justified.
I think this is usually the case for most IPOs, insiders cash out, index-funds buy in. Basically it is a one-time technique for investors to extract money from pensions.
If you try to configure the index-fund to avoid this problem it is not longer passively managed as each new stock needs to be evaluated in a (at least) semi-subjective manner.
IPO was in the 50B $ valuation range, and at the time, there wasn't any hint it made any financial sense.
Of course, hindsight is hindsight, but for every Facebook there's been countless IPOs of tech companies shrinking their IPO valuations by 90% in the following years.
The critical view is that these IPOs are bumping up against physics. How many trillion dollar companies can the economy support? The US GDP is roughly 32 Trillion. A company with 100 billion dollars in revenue and 10x annual growth would be expected to increase the size of the economy by 3.2% in its first year, and about 30% in it's second year post IPO existing.
While we could claim that such a company can grow by consuming a larger share of the GDP ... this would not bode well for future political stability, and nationalization would be a major topic.
So your left with a fast take off scenario, a job apocalypse, or a massively reduced growth rate.
If Anthropic has anything line that level of success, it will also be at the expense of huge unemployment, because Claude is really competing with knowledge work
Bingo. The bigger story is that the float is not there so the companies are "public" in that they sell a small number of shares at IPO to get crazy market caps that then force the ETFs to buy stimulating demand. It's genius and infuriating at the same time.
It is a one-time technique for private investors to extract money from pensions.
I moved all my money outside US index and global index funds because of SpaceX and OpenAI. At least until these IPOs have passed I will not move any money back. The sheer size of these IPOs might trigger a market crash.
> Venture capitalists & private investors are sucking all of the possible growth and future upside from these companies and then dumping them on retail investors when there's nothing left.
A lot of the money that is deployed by VCs comes from pension funds and asset managers that ultimately manage money for the average Joe.
It's been absolutely astonishing to see software developers pick software development as the first profession to attempt to automate away. Couldn't you geniuses have picked any other profession to start with? And it's not just the developers at Anthropic & OpenAI, even at my own company, the rockstar developers were the first to try and automate away all of the software development jobs at our company.
I've been releasing open source software for ~25 years at this point. The goal of that was always to save other developers time, as part of a collaboration where other open source developers save me time with their own work.
From my experience, people are pretty good about cleaning up. The first year I went I camped solo, so I theoretically could have left a bunch of crap, but I didn't. The second year I camped with a camp, and they were really thorough with check out and break down. We had a formal clean up of certain areas that I participated in where I remember people finding the tiniest things, like little pieces of thread and what not. And then when I personally went to leave, we had someone come and inspect my area and whatnot. So in my opinion, I think people do a pretty good job. And even if people didn't do a good job... we are not talking about a beautiful national park here, it is a desolate wasteland where literally no life can survive. I saw maybe ONE bug while I was out there. Not even bugs can survive out there. It's like the surface of the moon.
It's not a wasteland. Plenty of insects live in the mud. Plus the pattern of the playa is special on its own. I honestly hate that burning man ruins the ground. Never the same after so many cars and people drive on it.
I never used Sora to watch content, but there was a guy on TikTok that used to post these great Sora generated videos that I really liked. Honestly, I was kind of surprised to hear that they were shutting this app down today.
I bought my son a Meta Quest headset and a second one for me to use while playing with him. Honestly, it kind of makes me sick when I use it. Will have to see if it gets any better the next time we play. I'm kind of lazy and just want to lie down when using it, but the last time I tried using it I had to stand up to be able to do whatever it was we were doing.
I was a VR developer from about 2014 to 2020 after many years in traditional video games.
The really sad thing about how VR evolved is that sim sickness was not taken seriously as a barrier for mass adoption. Too many devs and players cast it aside as a "them" problem. "They" couldn't handle it. "They" didn't have VR legs.
The bottom line is that most things that became popular in VR were violating the rules which prevented sim sickness. This was a self-fulfilling prophecy that led the VR world into a corner.
I'm hopeful that Valve will be better stewards of VR in the long run, once Meta shuts down its hardware division, which you know is coming in the next couple years.
The problem is that freer movement is more immersive and it’s that free movement that really increases the immersion, and immersion is the product that VR is selling over monitors. I do agree it’s a market limiting problem, but there’s only so many beat sabers and shooting galleries that can lock you in place and still deliver that.
> Apparently you will get used to it over time, I'm still on the getting used to it phase after a couple months.
I think this is one of the reasons VR is niche. You are not going to see mass adoption of a product where you need to get used to physical discomfort in order to properly use it. The use case is not compelling enough to enough people to get over that.
I don't have any problem with Waymos having a human in the loop for assistance, but sending all of our jobs to other countries is destroying the United States.
There was a debate with Mike Dukakis when one of the moderators asked if he would want the death penalty for someone who killed his wife. He gave some cold blooded answer.
The real answer was probably - I shouldn't be the one who decides what happened to the person who killed my wife.
In the same way - It shouldn't be up to me if I get fired or my job gets shipped overseas or done by an AI. If we're in a free market it's up to all the people who are buying what I'm making. If there's a cheaper way why wouldn't they take it?
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