SpaceX, OpenAI and Anthropic are poised to be three of the biggest IPOs of all time.
Estimates vary, but they’re expected to come public at a combined valuation in excess of $3 trillion.
SpaceX is aiming to sell $40 - $80 billion (other estimates pin that at $50 - $75 billion) of shares at a valuation of around $1.75 trillion, which would exceed Saudi Aramco’s $1.7 trillion valuation when it came public and make SpaceX the largest IPO ever.
The company has already made a confidential filing and could come public as early as this summer.
After its latest fundraising round valued the company at $852 billion, OpenAI is rumored to be targeting a $1 trillion valuation as well, with expectations that it will come public by the end of the year.
Anthropic, which is the smallest of the three, is still valued at $380 billion based on its latest fundraising round and is a heavy hitter in its own right. It’s also expected to come public in the tail end of 2026.
It’s no secret that I’m bearish on all three of the IPOs (I mentioned it in a recent Cabot Street Check podcast and touched on it again the next week) due to valuation concerns and listing changes that will force index fund investors to acquire stakes in the respective companies well before they’ve gone through price discovery in the market.
But I don’t have a crystal ball, and a disagreement about how stocks are valued and whether they’re worth owning is what makes a market.
For every bear who’s adamant that these IPOs simply represent venture capital outfits and early investors dumping on the retail investor, there’s a bull who sees this public offering as an opportunity to get in as close to the ground floor as possible on three potentially transformative companies.
Time (and the market) will tell.
Personal opinions aside, I’d like to spend some time talking about the brass tacks of how to participate in an IPO. It’s relatively straightforward, but the process varies by broker, and actually getting shares depends heavily on a number of factors, so let’s get to it.
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How to Participate in an IPO
- Work with the right broker.
- Submit an indication of interest.
- Estimated pricing.
- Submit a conditional offer to buy.
- Pricing and allocation.
- Shares begin trading.
1. Work with the right broker.
Not all brokers have access to all IPOs, and most public offerings are allocated very heavily to institutional investors rather than retail investors.
SpaceX, for instance, is rumored to be favoring E*Trade to handle its retail allocation, with perhaps as much as 30% of the shares available for retail purchase.
It’s possible that E*Trade ends up being the only way for retail investors to access shares. It’s also possible that other brokers who work with the IPO underwriters will have access to a smaller pool of shares for their retail clients (Fidelity is also mentioned in the reporting at the link above).
It is possible to open a new account with a brokerage firm with the intent of participating in an IPO, but it may not be worth the effort depending on how that firm allocates shares (more on that below).
2. Submit an indication of interest.
This process varies by broker. E*Trade, for instance, skips the indication of interest and the estimated pricing and goes straight to conditional offers.
An indication of interest is simply a non-binding expression of interest in buying shares. You just follow your broker’s steps for new offering participation and indicate that you’re interested in a specific number of shares of the upcoming IPO.
3. Estimated pricing.
As brokers and underwriters get more information about the interest in IPO participation, they begin putting together an estimated price range. Underwriters are looking to maximize the offering price without setting it so high that potential buyers back out.
At this step, you’d expect to see an estimated per-share price range, say 20 to 24 a share. This is also non-binding.
4. Conditional offer to buy.
A conditional offer to buy is basically a limit order for investors. You tell your broker how many shares you’d like to buy and up to what price. In most cases, you need to have cash on hand (or buying power) to cover your full potential purchase; check with your broker for details.
A well-run offering should be in or near the estimated range, but final pricing can land outside that range.
Importantly, this is a firm offer. You’re telling your broker that if you can get access to shares at your specified price, you want them, and you’ll buy them.
5. Pricing and allocation.
At this stage, the underwriters have a view of the offers to buy from all of their institutional and retail clients.
The underwriters take that information and determine the final offering price. The price is finalized regardless of the initial range, and everybody pays the same price for shares. (You won’t, for instance, pay 20 a share while someone else pays 18 just because they said that was their price limit. If the offering prices at 20, somebody who offers to buy up to 18 just won’t get shares.)
Then, the underwriters and brokers decide how to allocate their available shares across all potential investors.
Brokers are free to handle the allocation however they see fit. They can use assets at the firm as a criterion, length of the client relationship, or some other factors. They can even do a proportional allocation that favors long-term clients while providing fewer shares to brand-new clients.
Brokers typically have minimum lot allocations (they won’t give a million people one share apiece, for instance, because it would lead to a bad experience; when I was a broker during the Meta (META) IPO, I believe we used 100-share lots).
Whatever process your broker lands on, this is when shares start hitting accounts. If you offer to buy 800 SpaceX shares via E*Trade (hypothetically) at 50 a share, and the IPO prices at 46, you could end up with anywhere from 0 to 800 shares of the IPO at 46.
The more hype an IPO has, the more likely it is to be oversubscribed, and the more likely you are to receive 100 shares, 200 shares, or none at all (in this example).
6. Shares begin trading.
New IPOs don’t begin trading right at market open. They’re typically delayed by the allocation process. Exchanges start off by providing indicated opening prices based on buy and sell orders, and they can have wide ranges and move quickly.
In our hypothetical SpaceX IPO, if SpaceX priced at 46, there could be bids at 50 and asks at 75 or 100.
Once shares start trading, it’s going to be very volatile. ALWAYS use limit orders. If you want to sell at a price close to the market, put in a limit at a lower price. If you want to use the limit equivalent of a market buy, place a buy order above the last price.
Again, don’t place market orders.
At this point, shares are in price discovery, and they’ll trade just like any other stock.
One final note: Many brokers have rules that are designed to discourage investors from getting IPO shares and then immediately dumping them, up to and including preventing those investors from participating in future IPOs.
That shouldn’t prevent you from selling if it’s the right thing for your money, but it’s something to be aware of, and it’s worth asking about before you get too far along in the IPO process.
If you’re planning on trying to get in on one of this year’s mega-IPOs, I won’t be joining you, but hopefully this leaves you better prepared for dealing with the mechanics of the process itself.
And if you’re seriously considering it, go ahead and call your broker to ask about how to participate in an IPO before these offerings start coming public.
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