Wellington says AI mega-listings will boost prospects of smaller companies

Josie Doan/PitchBook News

Big technology companies planning huge initial public offerings (IPOs) in 2026 will not push smaller companies out of the stock market, as long as those smaller companies are growing fast enough, executives at Wellington Management said on Tuesday.

Speaking to reporters one day after Anthropic publicly filed to list its shares on the Nasdaq, Matt Witheiler, head of late-stage growth at the $1.3 trillion investment manager, said public investors have enough money and capacity to handle IPOs from SpaceX, OpenAI and Anthropic, with plenty of room left for other companies.

"What about the group of companies valued between $100 billion and $1 trillion? I think many companies could go public in 2027 with values in that range," he said.

Witheiler said there is a big difference between companies growing by hundreds of percent each year and those growing more slowly. Late-stage startups whose revenue grows by 10% to 25% and that are close to breaking even must compete for investment with companies twice their size that are growing by 500%. "I think those companies don't get funded," Witheiler said.

His comments come as some people worry that huge IPOs will take money and attention away from smaller technology companies, especially those that do not benefit from the extra value investors give to businesses linked to artificial intelligence (AI).

In March, PitchBook analyst Kyle Stanford wrote that IPOs by SpaceX, Anthropic and OpenAI "would be a triumph for venture capital," but would also "create challenges for other companies looking to go public, keeping distributions for the year concentrated in a relatively small subset of investors."

SpaceX raised a record $85.7 billion in its June IPO. Anthropic filed its prospectus, a document explaining its business and finances to potential investors, on Monday ahead of a possible stock market debut in November. OpenAI has ruled out going public this year, but is likely to file its IPO paperwork publicly next.

Wellington's late-stage investment team puts money into companies one to four years before they go public. Its investments include Anthropic, ElevenLabs, Databricks and Baseten.

Witheiler said he had breakfast with Anthropic CEO Dario Amodei in September 2023, when the company had less than $100 million in annualized revenue, meaning revenue measured at a yearly rate. Witheiler was pleasantly surprised by some details in the company's prospectus, including how well it kept and grew revenue from existing customers.

"We didn't know it was that strong," he said. Anthropic reported a net revenue retention rate of about 900% and more than 1,900 customers who each generated at least $1 million in revenue during the previous 12 months.

The filing was "very liberating," he said. "Maybe this isn't pets.com. Maybe this is an actual thing."

Jeff Courey, who follows publicly traded software companies and AI infrastructure investments at Wellington's public-market funds, said investors already own many software companies whose revenue grows by 8% to 15% a year. But there are not many large companies whose revenue grows by 30% to 1,000% a year.

Courey added that some companies considering an IPO may be waiting to see how the biggest IPOs perform before deciding to go public themselves.

But the standards for companies seeking to go public "continue to rise." Investors want companies to have enough shares available for trading, run their businesses efficiently and grow at a strong pace.

"If you roll back to June, I think the markets were all optimism and no fear. I think it's pretty balanced right now," Courey said.

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This article originally appeared on PitchBook News