Should You Invest in an Anthropic IPO ETF? What Investors Need to Know Right Now.
Key Points
Anthropic is planning to go public in October.
Some ETFs hold shares of Anthropic today.
Buying those ETFs provides only minimal exposure to the underlying business.
Anthropic's potentially record-breaking initial public offering (IPO) could happen as soon as October, and in advance of that, many investors want exposure to the high-flying artificial intelligence (AI) company's shares before they're listed. One popular way to get it is by buying an exchange-traded fund (ETF) that holds some of its private shares.
But for most investors, buying those ETFs just to get some upside from Anthropic's IPO is misguided. Here's what you need to know.
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Anthropic is only a small component of these funds
A Bloomberg report from mid-August showed that at least eight U.S.-listed ETFs hold Anthropic directly. For example, the large language model developer's privately held shares accounted for about 1.2% of the KraneShares Public-Private AI & Technology ETF (NASDAQ: AGIX), a basket of about 65 AI and tech holdings. The heaviest weighting of Anthropic shares was 5.2%, in the Alger Concentrated Equity ETF (NYSEMKT: CNEQ).
At those weights, investing $10,000 in the KraneShares fund gets you ownership of $121 of Anthropic, and for the privilege, you'll need to pay its 1% expense ratio (annual fee), which will come to $100. Even the heaviest holder puts only about $520 of every $10,000 into Anthropic.
If you want to own an actively managed AI ETF anyway, these funds could still earn a spot on their own merits. And given that the AI field is much larger than Anthropic alone, they might be worth buying in general to get some exposure to the industry's growth.
Should you buy an Anthropic IPO ETF before the listing?
For most investors, it probably isn't worth buying these ETFs just for their Anthropic stake. The limited degree of exposure is only part of the problem.
The bigger issue is that key facts about the company and its financials are still missing. As of Sept. 16, there's no public S-1 (the prospectus with audited financials) for Anthropic, and no announced IPO date, target price range, or ticker.
While some revenue figures have been released publicly, as in August, when the company reported its annual revenue run rate was $65 billion, those are likely adjusted figures that may not translate cleanly into the generally accepted accounting principles (GAAP) figures that investors will see when the S-1 with the definitive set of financial data is published. Thus buying the ETF shares is jumping the gun, because it commits you to an asset whose fundamentals you can't yet check.
So for now, the best move if you want exposure to Anthropic is simply to wait for the full information to be released and then to decide whether to buy the stock after its IPO.
Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.