How Anthropic's 5% public benefit fund could reshape its IPO
Anthropic (ANTH.PVT) plans to set aside 5% of all its shares for a Public Benefit Fund before its planned IPO in November.
Jen Saarbach and Kristen Kelly, co-founders of The Wall Street Skinny, discuss with their expert panel what Anthropic's Public Benefit Fund could pay for and how the money could be used.
The panel on today's Market Hang includes Yahoo Finance's Julie Hyman, Mark Malek, chief investment officer at Siebert Financial, and Cory Johnson, chief market strategist at Epistrophy Capital Research.
I think it's interesting that Anthropic is a public benefit corporation. Jen, you and I were talking about what that actually means. It means that, along with trying to increase value for shareholders, the company can also consider what is good for the public. OpenAI apparently has a similar structure. The Public Benefit Fund means Anthropic is trying to get approval from its current investors to put 5% of its shares into a fund. The company can then decide how to use that money to benefit the public. But the irony is that we still have to ask who will oversee the fund. It reminds me a little of Facebook's oversight board. Who will govern the fund, and where will the money actually go?
I think you're right. We've seen that Facebook and Meta have not always acted in the public's interest. For more than a decade, almost two decades, we've seen how Facebook and Meta treat children and the public.
We've also seen that Anthropic was founded to be a different kind of company. Some people left OpenAI to start it because they didn't believe OpenAI was keeping its promises. But this also has an interesting effect on the market, and I'd like to hear what you all think. Setting aside 5% of the shares means putting $100 billion into a new charity. We hope that will be good for the world. But it also means 5% of the shares will not be available to sell as part of the IPO, right? That limits the number of shares available to trade. Company insiders also have restrictions on selling their shares. We don't know how many shares will be available to trade, and we probably won't know when the company first files its S-1 registration statement. We have seen investment banks, which we think include Morgan Stanley and Goldman Sachs, try to shape IPOs by limiting the number of shares available and deciding how long investors must wait before selling their shares. We saw unusual restrictions on selling shares in the SpaceX deal. Also, new rules mean some stock market indexes must buy shares very early in the process. It's remarkable that a company could set almost any IPO price if it keeps the number of available shares low enough. Setting aside these 5% of shares makes the number available even smaller.
This is the softer side of investing. To me, it is clear that these companies are trying to shape the story about themselves before the public's view turns against them. We've seen how public opinion can change and become negative toward some of these huge companies.