Selling Pieces to Strangers

It's Thursday, May seventh. Sometime in the next few months, three of the most important companies in the world are about to transform themselves. SpaceX, valued at 1.75 trillion dollars, plans to begin its IPO roadshow in June. Anthropic, the company behind Claude, is targeting October. OpenAI, the maker of ChatGPT, is aiming for the fourth quarter. Together, they expect to raise over two hundred and forty billion dollars from public investors. That's more than any IPO wave in history. The phrase "going public" sounds routine, like a company is simply opening its doors wider. It isn't. Going public is the moment a private company sells pieces of itself to strangers. It changes who the company answers to, how it makes decisions, and what it can get away with. It can make employees millionaires or leave them holding worthless paper. And the people who benefit most from the process are rarely the people you'd expect. An IPO, initial public offering, is the process by which a private company lists its shares on a public stock exchange for the first time. Before the IPO, a company's shares are held by founders, employees, and the venture capital firms that funded its growth. After the IPO, anyone with a brokerage account can buy and sell those shares. The mechanics are less democratic than they sound. The company hires investment banks, firms like Goldman Sachs, JPMorgan, and Morgan Stanley, to "underwrite" the offering. The banks conduct a roadshow, traveling to institutional investors like pension funds, mutual funds, and hedge funds to pitch the company and gauge demand. Based on that demand, the banks set an offering price. On the day of the IPO, the banks buy shares from the company at that price and immediately resell them to the institutional investors they've already lined up. The stock then begins trading on the exchange, and the public can buy in. Here's the part most people miss: banks deliberately set the IPO price below what they believe the stock is worth. This creates a "pop" on the first day of trading, the stock opens higher than the offering price, the institutional investors who got in at the IPO price make an immediate profit, and the headlines read "Company X soars on debut." That pop is great publicity. It's also money the company left on the table. When Google went public in 2004, the founders used a Dutch auction to set the price, cutting the banks out of the underpricing game. Wall Street was furious. Google didn't care. Most companies aren't Google. The reason companies go public is straightforward: they need capital, their early investors want to cash out, and their employees want to turn their stock options into actual money. SpaceX has burned through enormous amounts of capital building rockets and satellites. OpenAI is projecting training costs of thirty billion dollars this year alone, rising to over a hundred and twenty billion by 2028. Anthropic has raised over thirty billion in private funding. At some point, you exhaust the private money. The public market is the next and largest pool of capital available. The popular narrative around IPOs is that they create wealth for everyone involved: the founders become billionaires, the early employees retire, and the public gets to own a piece of the future. The reality is more stratified than that. The biggest winners are almost always the venture capital firms that invested early at low valuations. A VC firm that invested in Anthropic's Series A at a valuation of a few billion dollars is now looking at a potential IPO valuation of over three hundred and eighty billion. That's a return of a hundred times or more on their original investment, realized in just a few years. The IPO is their exit. It's the moment they convert paper gains into real money. This is the economic engine of Silicon Valley: invest early, add value, and sell to the public at a massive markup. Founders typically do well, though they often face pressure not to sell too many shares at IPO because it signals a lack of confidence. Elon Musk reportedly wants SpaceX's IPO to reserve up to thirty percent of shares for retail investors, far above the typical five to ten percent. Whether this is genuine populism or a strategy to create maximum demand and drive up the price is a question the market will answer in June. Employees are the group whose outcomes vary the most. If you joined a company early, received stock options at a low strike price, and the company IPOs at a high valuation, you can become wealthy overnight, on paper. The catch is the lockup period. For the first hundred and eighty days after an IPO, most employees are contractually prohibited from selling their shares. If the stock drops during those six months, the wealth that existed on paper disappears before you can touch it. This is not theoretical. Employees at Rivian watched the stock fall from a high of roughly a hundred and seventy two dollars to under twelve dollars. Peloton employees saw a similar collapse. The lockup period is designed to prevent insiders from dumping shares immediately, but it also means employees bear the risk of a declining stock price with no ability to act. SpaceX is reportedly considering eliminating the lockup entirely and allowing existing shareholders to sell on day one. If they do, it would be one of the most significant structural changes to the IPO process in decades, and a signal that the company is confident enough in sustained demand to let insiders sell immediately without crashing the price. Going public solves the capital problem. It creates the liquidity problem. Once a company is public, it reports earnings every quarter. Analysts publish estimates. If the company misses those estimates by even a small amount, the stock can drop ten, fifteen, twenty percent in a single day. This creates enormous pressure to manage the business for short-term results rather than long-term value. Projects that might take five years to pay off get questioned every ninety days. Research investments that won't generate revenue for a decade look like expenses on this quarter's income statement. Amazon survived this pressure only because Jeff Bezos spent years training Wall Street to ignore short-term profits. His 1997 shareholder letter, written when Amazon was barely breaking even, declared that the company would prioritize long-term value over quarterly earnings and that investors who disagreed should sell their shares. Most CEOs can't make that declaration and keep their jobs. The quarterly earnings machine is a treadmill that most public companies cannot get off. For AI companies specifically, the tension is acute. OpenAI doesn't expect to be profitable until 2030. Anthropic is targeting breakeven in 2029. Both companies are asking public investors to underwrite years of massive losses in exchange for the promise of future profits that rival the largest technology companies in history. That's a bet on the trajectory of artificial intelligence itself, and the investors making that bet will be watching every quarterly report for evidence that the trajectory is holding. The deeper question is whether going public changes what these companies are willing to build. A private company can pursue ambitious, risky research without explaining every decision to shareholders. A public company answers to the market, and the market rewards predictable revenue growth. OpenAI's internal culture has already shifted as it transitioned from a nonprofit research lab to a for-profit company. Going public will accelerate that shift. Anthropic, founded by researchers who left OpenAI partly over concerns about commercialization, will face the same pressures. The mission statements won't change. The incentive structures will. The irony of the 2026 IPO wave is that these companies are going public precisely because the AI hype cycle is at or near its peak, which means valuations are as high as they'll likely get. The window is open. Whether it stays open through the fall depends on whether SpaceX's June offering succeeds or stumbles. A successful SpaceX IPO paves the road for Anthropic and OpenAI. A disappointing one could close the window for everyone. So if this comes up in conversation, here's how to think about it. Going public means selling pieces of your company to strangers in exchange for capital and liquidity. The banks that manage the process deliberately underprice shares so that institutional investors make money on the first day, which means the company leaves money on the table. The biggest winners are the VCs who invested early at low valuations and sell at IPO prices. Employees can get rich, but the lockup period means they often can't sell for six months, and if the stock drops during that window, the wealth disappears. Once public, a company reports earnings every ninety days and faces relentless pressure to prioritize short-term results over long-term bets. SpaceX, OpenAI, and Anthropic are all going public this year because AI valuations are at their peak and private capital has been exhausted. Together they're raising over two hundred and forty billion dollars, the largest IPO wave in history. The question isn't whether these companies are important. They are. The question is whether the public market will make them better or just make them different. Stay informed, stay curious, and we'll see you tomorrow.