As anticipation for Anthropic's IPO heats up, investors need to be wary of the dramatic volatility that can occur after a hot IPO. Historical statistics on large IPOs show that the average maximum drawdown of 20 large listed companies in their first year was approximately 60%, meaning their share price fell by about 60% from its peak. Similar statistics, from Truist's analysis of 30 popular tech IPOs, found that their average maximum drawdown in the first year was 55%, with a median of 54%. This demonstrates that even with strong growth prospects, high valuations in the early stages of an IPO, shifts in market sentiment, and profit-taking by early investors can still lead to significant volatility. For a hot AI company like Anthropic, a high valuation is inevitable; however, for investors, the more important question is whether the IPO price has already factored in future growth, and specifically, how much future growth has been overdrawn.
