#80: Anthropic IS the IPO Market (The OURA Deal was LOUSY)

Craig Stephens (0:00)

OURA postponed its IPO, citing a rather dubious excuse, uncertainty in the IPO markets. So is Anthropic doomed to be the next delayed IPO? Possibly, but it won't be due to IPO market uncertainty. At this point, Anthropic is the IPO market. In IPO radar news, NeoCloud Lambda could follow Nscale into the public markets. OpenAI is only raising 30 billion this round, and Blue Origin could eventually land on an IPO. Welcome to the Access IPOs Podcast, where we explore opportunities to invest in the world's most innovative and disruptive pre-IPO companies. I'm Craig Stephens, founder of Access IPOs. Most of you have probably already heard that OURA postponed its IPO the day before its IPO date. OURA is a profitable company. Markets are somewhat near all-time highs, and it would have had the spotlight all to itself with this IPO, yet they pulled the deal the day before. The press release that came out of OURA, I thought it was BS. OURA postpones its initial public offering. This is from September 29th. Says, OURA announced today that they're postponing its previously announced initial public offering on the NASDAQ despite strong demand, but due to uncertainty in the IPO markets. Goes on to brag about the company and how things are going. CEO Tom Hale goes on to say, we aim to deliver an extraordinary IPO for our employees and investors, and we have the luxury of choosing our moment. In the meantime, we'll execute against the opportunities ahead. He mentioned employees and existing investors, but what about all the investors that wanted to invest or who want this company in their mutual fund portfolios? Now about this uncertainty, there are a lot of companies that we thought might IPO this year and didn't move forward with releasing their S1 filing. And there are a few companies who actually did postpone their IPOs for similar reasons, I guess, this uncertainty in the IPO market. And the only real uncertainty is there just hasn't been a lot of IPOs, and that could be because the underwriters, the large banks are saying, don't do it right now, let's wait to see what happens with the midterms, or let's just push it to 2027 And at this point in the year, it's very easy to say, let's do it next year. And every year that happens, more and more companies push to the next year and then they don't IPO. That was Discord last year, Kraken last year said that, and they never IPO this year. Two of the notable companies that did actually delay, Holtec International is a nuclear company that was planning to IPO, it says their decision has been caused by the unusual confluence of developments that has impaired investor confidence in the market for new public offerings. Not sure where that's coming from. SpaceX did okay, there's been successful IPOs this year. The adverse market sentiment has affected the equity markets in general, and the nuclear sector in particular in the past two weeks. They're driven primarily by uncertainty over data center development, which has compounded a set of preexisting headwinds, including rising energy costs, elevated global trade tensions, ongoing military conflicts, and mounting inflation fears. This is all old news, right? We've had inflation for several years now. Plenty of IPOs have happened with inflation. Oil prices have risen. That's not the fault of any IPO-ing companies, right? Another company that canceled its IPO or postponed its IPO is Bamboo.

This is an insurance company. Neither of these companies are really well known. OURA is the most well known. And by OURA postponing or canceling its IPO, citing uncertain market conditions, they're the ones making the IPO conditions uncertain. Maybe that's the talking points that their lawyers are giving them or their bankers are giving them. Clearly Morgan Stanley, JP Morgan, and Goldman Sachs, the three large underwriters that run most of these deals are telling their clients, let's not do this. Still getting paid for it. What a big waste of money to go all the way up to the day before the IPO and cancel it. In a moment here, I'm going to tell you exactly why OURA canceled this IPO and it's not market uncertainty, at least it's not IPO market uncertainty. But before we get into that, a quick word from our sponsor. Support for the show comes from VCX, the public ticker for private tech. 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Carefully consider the fund's investment objectives, risks, charges and expenses before investing. The fund's SEC filings, including any current prospectus in the fund's annual and semi-annual reports are available at getvcx.com. Review them carefully before investing. This is a paid sponsorship. The host is long, VCX. Thanks to our sponsor for supporting the show. Now, the real reason that OURA postponed its IPO is because they were launching a lousy deal that was overpriced and it wasn't meant to set OURA up for growth in the future. It was primarily meant to liquidate some weak handed investors. Why do I think this was a lousy deal? Well, first of all, more than half of the offering was there to liquidate some early shareholders. Those two shareholders were Forerunner Ventures and Lifeline Ventures. Talked about this in an earlier show. But between those two, they were looking to sell about 35 million shares. And when an early investor who believed in this company years ago at the Series A, Series B, when they want to sell all of their shares at the IPO price, what does that say about confidence in the long term growth of this company? It was surprising to see these companies selling shares and for it to be such a large percentage of the total offering. But when we see this, we question why is this investor who used to believe in the company wants to completely liquidate their shares. The other questionable piece of this deal was that OURA was only planning to raise about $530 million and the use of proceeds was to pay some taxes. It didn't say anything really about investing in growth. It said, we're raising this money to pay off taxes. Now OURA was profitable, so they have money to reinvest back into the company, but maybe that was a red flag. They were primarily IPOing to liquidate an existing shareholder. They weren't really looking to raise a lot of money to invest in growth, just pay some taxes off. So the conviction here just wasn't very strong. But what this really came down to was that OURA was unable to get the price it wanted in this deal. There was an article that came out of Axios, Dan Primack. He spoke to someone behind the scenes and it said OURA was basically unable to get the price it wanted. In part, due to turmoil tied to the bond yields and oil price volatility, said a person familiar with the situation. So it's not the IPO markets that's the problem. It's the bond markets and the oil markets and geopolitical issues. Although those have been around for a while. What this really comes down to is that initial price range was in the $40 to $45 range. They were hoping to come in at the high end of that or maybe even a little higher, which is what we want to see from an IPO. But when they took this to investors, the investor said, we don't want to pay that price. And I guess either Forerunner Ventures or Lifeline or OURA itself had a price in mind that they said, we're only going to move forward if we get that price and they couldn't get it. And that's despite this thing being five times oversubscribed. We've learned from previous deals, if five times oversubscribed isn't all that much for a small deal like this, we've seen 20, 30 times oversubscribed for sub $10 billion deals. SpaceX was around, I think, four to five times oversubscribed, but there's a lot more shares that launched in that deal. Think about it, if you were trying to sell a house and you put it out there and you thought it was worth a million and there were no buyers at a million, the only solution is to lower the price to sell that house. And it's the same thing with this IPO. If you can't get enough buyers at the price you think it's worth, then you got to lower the price. And that's what the bankers maybe promised a certain price at the onset of this. But when it came down to it, when they were taking this on the road show and talking to institutional investors, they weren't too excited about paying the top end of that price range. Something is only worth what someone else is willing to pay. And in the case of an IPO, there's a lot more investors that need to agree to that price, or the price is going to fall at the onset. And I guess they were sensing that in this deal, and they yanked it. So structurally, this deal was a red flag with this existing shareholder. Think back to SpaceX. Do you remember how many existing shareholders wanted to sell at the IPO price? The answer is zero.