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Greetings!
Happy days are here again! Stocks have rallied, thanks to upbeat headlines concerning the Iran war. Don’t get too comfortable—things are likely to change quickly. In fact, the Iranians are threatening to attack U.S. tech facilities in the Middle East. Meanwhile, we got news today on a variety of fronts concerning Microsoft, Nvidia and Anthropic (see below for more details). Among other things, OpenAI finalized its big funding round, announcing commitments totaling $122 billion.
We should emphasize that those are commitments, not necessarily cash. Much of the money won’t be wired into OpenAI’s bank accounts for a while. Amazon accounts for $50 billion of the total, but it’s only putting up $15 billion now, with the rest to come later, depending on various factors, such as when OpenAI goes public. SoftBank is putting in $30 billion, spread over three payments between now and October.
OpenAI gave us the news of the completed fundraising in a chirpy blog post, which revealed that the company was generating $2 billion in revenue a month (no word on profits—not a term AI has learned yet, it seems).
The blog post closed with the upbeat message that the capital it is putting to work today will eventually “flow back into the economy, to companies, to communities and increasingly to individuals.” Yay! Apparently what’s good for OpenAI is good for America. We’ll see.
The IPO Class of 2021
With a few rare exceptions, tech stocks are no country for small investors. The best way of demonstrating that is by looking at the companies that went public in 2021, when ultralow interest rates fueled a boom year for IPOs.
If you invested in one of these deals, chances are you lost your shirt. In fact, if the IPO class of 2021 was a graduating class of college students, a good many would be living in homeless shelters (and a few would be in graveyards).
Take the once-trendy venture-backed shoe firm Allbirds, which on Monday night said it was selling its assets to a fashion brand owner, American Exchange Group, for just $39 million. Allbirds’ IPO valued the firm at $2.2 billion. Then there’s Rent the Runway, whose lenders took control of the firm last August. The company now has a market capitalization of $159 million, down 88% from its IPO valuation.
Or there’s BuzzFeed, the once high-flying digital media firm, whose market cap has dwindled to $23 million from around $1.2 billion at its public debut. Earlier this month, BuzzFeed said it had doubts about its ability to continue “as a going concern” and was considering strategic options.
This trio of companies offers a reminder that in the crush to go public in 2021, quite a few duds did so. Some of those that went public did so after their businesses had peaked. Some were simply massively overvalued. Many were both overvalued and starting to decline.
Since then, several got snapped up at big discounts to their original valuations. One of the first to go was Poshmark, which South Korean firm Naver acquired in 2023 for $1.2 billion, down from Poshmark’s $3 billion IPO valuation. IBM has bought two members of the class—Confluent last month for $31 a share (down from its IPO price of $36) and HashiCorp last year for $35 a share (its IPO price was $80). Two other class members, Coursera and Udemy, are merging, both at big discounts to their IPO price.
Others are surviving but with vastly diminished stocks. Monday.com went public at $155 a share. Its stock is now at $69. UiPath’s stock has fallen 80% from its 2021 IPO. GitLab is down 72%. The same is true for ThredUp and Warby Parker. Then there’s dating site Bumble, which is struggling to find ways of growing again. Its revenue declined last year, and the stock is now trading 92% below its IPO price.
Among the few members of the class to prosper is Robinhood, whose stock is actually well above its IPO price. Affirm, one of the original “buy now, pay later” firms, is also doing fine, although its stock price is a little below where it went public. Affirm’s situation is, relatively speaking, a good outcome for the class of 2021. It’s a lesson for small investors everywhere.
In Other News
• Anthropic mistakenly leaked some of the source code underlying its Claude Code application, the company said on Tuesday. The leak revealed new details about how the popular AI coding tool works and potential unreleased models and features.
• Bobby Hollis, a Microsoft vice president in charge of procuring energy for its data centers, has left the company for a new opportunity, he said Tuesday in a LinkedIn post.
• Oracle is laying off thousands of employees, CNBC reported. The move comes as the company’s substantial spending on AI data centers has eaten into its cash reserves, prompting it to issue tens of billions of dollars in debt.
• The U.K.’s Competition and Markets Authority will investigate Microsoft’s sales of business software, the regulator said on Tuesday, citing concerns that the company’s software licensing practices have reduced competition in the cloud computing market.
• Amazon Leo, the company’s upcoming alternative to SpaceX’s Starlink internet service, will power Wi-Fi on 500 Delta Air Lines planes, the companies said on Tuesday.
• Activist investor Irenic Capital Management called on Snap CEO Evan Spiegel to make “meaningful changes” in how the company is run in hopes of lifting its faltering stock price from its current price of below $4. Irenic estimated Snap stock could be worth above $26 a share.
• Nvidia said it has invested $2 billion in chipmaker Marvell Technology as part of a “strategic partnership” in which Marvell will supply chips that work with Nvidia’s technology.
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