00:00 Julie
Pre- IPO excitement is putting the spotlight on private markets as investors aim to invest early in companies like SpaceX, Open AI and Anthropic. But investing in these markets does come with risk and by next guest says investors are better off waiting perhaps until their public listings. Joining me now is Matt Powers, managing partner at Powers Advisory Group for this week’s FA Corner brought to you by Capital Group. Matt, it’s good to see you.
00:23 Julie
Um this has been the week of like focus on these pre- IPO companies, right? We got the S1 from SpaceX. We got a report that Open AI was prepare we’re preparing to file confidentially for its IPO, Anthropic going profitable in the first quarter. So a lot of focus here. And I’m curious first, what kind of incoming you’re getting from clients who like want in on these things?
00:43 Matt Powers
Yeah, good morning, Julie. Thank you for having me here. Uh you know, right now, I think there’s just a lot of FOMO in these secondary private markets. You know, we’re starting to get some questions from clients, you know, as this hits headlines, but I think we’re going to see that ramp up a little bit. You know, we’re on the, on the heels of this bull market that’s been driven by an industry that didn’t really exist four or five years ago and it’s normal for IPOs to have this kind of mania, but
01:10 Matt Powers
I think what we’re seeing is totally different here with SpaceX, Anthropic, Open AI and, you know, unlike anything before, but we never had an industry uh move this quick. Anthropic was literally just founded in uh 2021. You know, open eyes looking at a $850 billion valuation, anthropic like 900 billion. So, it’s kind of crazy. You know, a lot of retail money is chasing these, these private secondary markets without transparency and, and enough information to properly price in some of the risk.
01:40 Julie
Well, and it’s also really interesting that Anthropic um came out and said be careful of specifically said like here are the secondary markets where you’re not necessarily getting legit shares of the company. So I imagine if you are getting clients who are really insistent they want in there that, you know, you have to steer them in the right direction.
02:02 Matt Powers
I mean, I think absolutely and you know, you could you could take SpaceX alone, you know, you’re looking at a $1.5 trillion valuation and $75 billion capital raise. So, it would by itself be almost twice the IPO market from last year of all, I think 90 public listings. So it’s be the biggest of all time. So if those numbers hold, just for familiarity, it would exceed the combined market cap of Disney, Nike, McDonald’s,
02:29 Matt Powers
I think I had Coke and Starbucks all combined. So, you know, Musk would officially become a trillionaire on paper. So it’s a big bet on Musk himself, but I think regardless of all this for investors, I think the bigger story that’s kind of unfolding underneath the surface here is that the AI race is pretty quickly becoming just a battle over infrastructure and this whole ecosystem is now pretty interconnected especially with these IPOs. You got open A I’s tied to Microsoft, you’ve got Anthropic with Amazon and Google, SpaceX like the infrastructure underneath all this, but investors need to really separate some of that excitement from valuation discipline thing.
02:59 Matt Powers
And so, so to your point, um, you know, I, I think you’ll see retail investors chasing some exposure here without transparency. You know, these trillion dollar valuations are being assigned long before there’s any profitability on these companies, but but my view is pretty simple to investors. Uh, you’re better off waiting for public market access rather than trying to force yourself into some kind of unclear private vehicle. You know, give it a breather before you jump right in, let the market maybe fully scrutinize the margins and the cash burn and and some of the competitive positioning.
03:29 Julie
Um that’s really important too. I think, uh Matt, so let’s dig into that a little bit too because if people, so for people who do want to invest in these companies when they become public. You think like don’t get in right there at the first day, maybe, you know, give it a beat, kind of see how they trade.
03:52 Matt Powers
Yeah, I mean there’s mania here, obviously, and it’s I think we’re just like really, really starting to see what’s what’s going to happen, especially with headlines, you know, after Wednesday when when SpaceX filed. So I think the good news for investors that want to get in right away, the front door is kind of opening here. So SpaceX, they look like they’re going to allocate, I think a a good meaningful portion of of shares towards retail, uh participation. So I think fidelity, Schwab, some other platforms.
04:19 Matt Powers
You know, and Open AI kind of hinted at the same thing. So the opportunity is going to be there without needing to take this venture capital level risk in these secondary markets. So, so me as an investor, you know, I would give it just again to your point, I’d give it a a few days just to see what shakes out. You know, it’s it’s again going back to the FOMO, you’re not missing out necessarily on anything. Um, just let let the markets kind of shake out here a little bit and see what what what happens.