OpenAI Hits Pause On Its IPO

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1:43Money market's mad. If money is evil, then that building is hell. The show goes on! The show goes on! The show goes on! Welcome to Prof. G Markets. I'm Ed Elson. It is June 30th. Let's check in on yesterday's market vitals. The major indices climbed as tech stocks rallied. The Dow closed above 52 ,000 for the first time. Comcast jumped 5 % after announcing it is spinning off NBCUniversal and Sky from its cable business. Meanwhile, oil rose after the US and Iran exchanged fire over the weekend. President Trump said the two sides are now set to hold fresh talks today, though Iran denied those claims.

2:26And finally, Treasury yields were stable after the Supreme Court overruled Trump's attempts to fire Fed Governor Lisa Cook. Still in a separate decision, the court expanded the president's authority to fire officials at other independent agencies. okay what else is happening open ai is reportedly delaying its ipo until 2027 the company confidentially filed to go public on june 8th and was on track to debut as soon as this fall but according to the new york times the fallout from spacex's rocky ipo has pushed open ai executives to hit the brakes meanwhile rival anthropic is racing ahead calci now puts the odds that Anthropoc goes public this year at 76%.

3:15So to discuss what this delay actually means for OpenAI and for the AI markets in general, we're speaking with Alex Heath, author of The Sources newsletter and co-host of the Access podcast. Alex, thank you for joining us. This is huge news, unconfirmed officially, but this was reported by The New York Times. OpenAI, the plan was They were going to go public. They filed confidentially. And now apparently they're scared of doing it this year. You do a lot of reporting on OpenAI. What do you actually know about this? What can we actually take away from this news?

3:52Alex Heath:I think this is always very much in flux. It's been interesting to see how many versions of OpenAI IPO-ing we can get in the press in the last couple of weeks. It's been kind of remarkable. I think there's a lot of investor banker types who are trying to gen this up. I don't think OpenAI is ready. I know that they're still trying to get their finance and investor relation organization org in place for what is needed for a public company. When you do the confidential filing, as OpenAI said when it did that, you're really just setting yourself up with optionality to then be able to go out at a later date.

4:32Alex Heath:But I remember Reddit, that thing was in confidential filing for years because they thought they were going to go out and then they didn't. And I can't remember if it was the pandemic or something else, but it's very common for companies to do a confidential filing, which is just starting the process with the SEC and then delay multiple times, even years in some cases. Doesn't it seem, though, that at least there are people within the company who definitely did want to? The person I'm thinking of was Sam. And I remember we saw that reporting and who knows what's true at this point. But we saw this reporting where Sam Altman wanted to go public.

5:08He was trying to push that. And then the CFO, Sarah Fryer, said, no, I don't think we're ready. I don't think this is the time to do it. I mean, I have to assume that there are people within the company who really wanted this to happen, and now they're probably having to concede maybe this isn't the right time, specifically Sam.

5:27Alex Heath:Yeah, I mean, the reporting is that Sam has been pushing for it, which I totally buy, and that he wants a$1 trillion valuation, which I also totally buy. I do think there's probably others who are saying we're not ready. OpenAI and Anthropic, these are not normal companies. They don't work like normal companies. They're incredibly chaotic. They don't have formal processes in place that a mature public company would have. As commercial entities, they're really only a few years old. So even though they have these massive valuations, they very much feel, and you feel this when you talk to people internally, like a startup.

6:02Alex Heath:And that has a lot of things that have to be ironed out before you can IPO. I do think Anthropic will go out first. I have heard and others are reporting that they're eyeing October, November. I think they're a little farther along on building that muscle. They also have a bit of a simpler story to tell investors because of the kind of clarity of what they do is primarily an enterprise API business. OpenAI just has a lot of wild cards, right? Ads are still rolling out. That story is not there yet. The hardware stuff they're going to be doing with Johnny Ives, starting with the first device I think they're going to announce in the fall.

6:39Alex Heath:That's a giant wild card. Their super app strategy has not yet come into place. There's a lot of moving parts, and there will always be with these AI labs. But I think Anthropic actually just has a simpler story to tell right now, which is also why it will probably go first. I think that's exactly right. but part of my takeaway from this is it seems as though OpenAI on multiple different levels doesn't really have its shit together. And the confidential filing, to your point, this happens. Companies file. It takes a while. But you also have to assume that, I mean, someone within the company should have known if we file, it's going to be reported on.

7:20And if we don't go public, that'll be reported on. and everyone's going to have a lot to say about all of this. The same is true of saying, we're going to stop doing these side hustles, which was sort of their MO, and then they go out and continue to do these side hustles, including going out and spending$200 million on a podcast. I mean, I feel like there are multiple different levels in which OpenAI doesn't really know what it's doing. Or at least that's the vibe I'm getting from all of these stop and start announcements. Am I being too critical, or would that be a somewhat fair characterization of the company?

7:52Alex Heath:I think they are a jittery company. I think this IPO thing is really being genned up in the media by investors. I think the only concrete thing that's happened is they filed a confidential S1. They said they would do that. When they announced it, they said, we do not have a sense of timing. That is the only thing they have confirmed. And then there's a lot of anonymous reporting about, you know, they were thinking about the fall and now they're thinking about 2027. We may get a new round next week saying they're thinking about the fall again based on whatever leaks out of Anthropic. There's a lot of messages being sent through the press right now.

8:30Alex Heath:I wouldn't necessarily take all of this as like super concrete. I think it is a very dynamic, fast-moving situation. Anthropic's ARR could crater for some reason in the next quarter, and then the story is not there. OpenAI super app thing could not work, and then it needs another year to regroup from that. Ads could not work. The hardware could not work. They may need to redo the executive bench, right? There's a lot of things that they have to get through. I do think they will IPO. I would be shocked if it was in the second half of 2027. I think it will be before that, whether that's Q3, Q4, or Q1, Q2 next year remains to be seen.

9:10Alex Heath:But we are going to get an IPO because you kind of have to. They've raised too much money. I mean, this is the natural in-state. They could do another private round. They'll do an employee tender offer here soon. But, you know, I do think Sam in particular wants to IPO. And, you know, based on the success of SpaceX, at least, you know, on the IPO day, they certainly have a path to that, I think. Well, it's funny you mentioned that because one of the reasons that was cited in that article for why they're worried about going public was that they saw SpaceX as a failure. To your point, massive pop on IPO day.

9:45Since then, it's come crashing back down, but it's kind of around where it was when it started. Do you think that that is genuinely a reason that they're worried about it when they look at SpaceX? I don't know, man.

10:02Alex Heath:SpaceX, you went into the numbers. Is SpaceX trading at one point or 2.16 trillion a good outcome or not for SpaceX? I mean, based on their revenue, I think it's pretty good. I also think it's ultimately pretty good. I think ultimately it's not going to last. And I think that's going to be a problem, which was honestly why I was a little surprised to see that in the reporting that they saw SpaceX as a problem. Did Scott calling Tesla being over not teach you anything, Ed? You can't. This is Elon. Come on. um look i think i think spacex at two trillion and raising 80 billion or whatever on the ipo signals there is a market here i don't know if like you know the third big ai ipo gets as much love as the second right i think that's why open ai and anthropic really want to go first one of them um it will be a little tougher sell when you hit the third one i mean how much retail demand is there for these things and where will the world be in the fall with the midterms everything going on in the world, right?

11:01Alex Heath:So the fall gets kind of hazy and complicated in a lot of ways. I think Elon times SpaceX perfectly in the sense of this, you know, AI bubble fervor we're in in the markets. And it's, I think it's very unclear what happens, you know, the Fed may raise rates in the fall. There's a lot of things that can make the stock market a really dangerous place. Do you think that ultimately this has implications for the AI trade at large? I mean, And if the signal we're getting from open AI is there isn't enough demand out there, there isn't enough excitement or hype or we're not ready, does that mean that we're headed for some problems in the AI market at large?

11:45Or is this more of an open AI specific issue?

11:48Alex Heath:I think it's an open AI thing. I think these companies are just not ready. And they're way more chaotic than they look even on the outside, even to people following them. They're startups still. They don't have all of the rigor in place that you need as a public company. OpenAI's disclosures are a mess, right? With, you know, Sam owns no equity. They're invested in all these things that they're doing deals with. The governance is all over the place. I mean, it's just a very complicated company to try to, like, make sense of if you're like the SEC. So I think they're probably just going to keep sending smoke signals out, you know, of like, oh, we're going to do it now.

12:26Alex Heath:Oh, no, we're going to do it now. And like, Anthropic will do the same thing. And we are in uncharted territory. I mean, I feel like that's always the case with AI and the AI trade, but it really feels that way now, doesn't it? We should literally do a smoke signal from Sam Altman's house, let it out like the Pope when he finally decides that it's time. That'll be the right story for investors. Okay. Alex Heath is the author of the Sources newsletter and co-host of the Access podcast. Alex, always great chatting with you. Thank you so much. Always great. Thanks, Ed.

13:00After the break, Bitcoin enters a world of pain. And for even more markets insights, you can subscribe to my weekly newsletter, Simply Put, at simplyput.profgmedia.com.

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16:13We're back with ProfG Markets. The price of Bitcoin is plummeting, and as of now, the sell-off is showing no signs of stopping. In just the past month, Bitcoin has fallen from around$73 ,000 to$60 ,000. Last week, it hit its lowest point since October of 2024, before the election. And despite the Trump administration's pro-crypto agenda, investors today are nowhere to be found. All told, Bitcoin has erased more than 18 months of gains, and it's down over 40 % in the past year. So for more on this implosion in the crypto markets, we are speaking with Jemima Kelly, columnist at the Financial Times.

16:56Jemima, thank you so much for joining us. Back in February, we were seeing a lot of weakness in the crypto markets. Bitcoin took a leg down to around 70 ,000-ish. And that seemed really bad at the time. And you wrote this column basically saying that Bitcoin was, in your view, due for even more pain. And that is indeed exactly what we're seeing. We're now down to 60 ,000. It's basically been cut in half since its highs of around 120 ,000. Let's just start with your reaction to what we're seeing here in the crypto markets. I mean, yeah, as I wrote, I still felt that Bitcoin was 70 ,000 too high when it was at 70 ,000.

17:37So I now think it's about 60 ,000 too high. I think that fundamentally there's nothing there because it's all just belief. And therefore, eventually we'll get to zero. I've never been someone who wants to kind of, you know, say when that's going to happen. But it definitely has felt to me, the reason I wrote that column in February is because it has felt to me that this is kind of the kind of we're getting to the last bit of Bitcoin. and I'm not going to stick my neck out and say it's going to happen this year that we're going to zero. I don't think it will happen that soon. But the fact that we have this incredibly friendly crypto environment and it still kind of doesn't seem to be finding any way of like any support does suggest that we're heading down and down and down from here.

18:28Your view is that$60 ,000 is$60 ,000 too high that actually the true value is zero, which for many, that would be an extremely striking statement. Why do you believe that this is worth nothing? There is nothing that underpins Bitcoin other than belief. It is built on sheer belief. And obviously, stock markets and other markets are built to some extent on belief. And we're constantly thinking about a price of an asset is based on past performance and expectations for future performance, future growth, future returns. And so obviously, there's always a speculative element within any kind of asset price.

19:13With Bitcoin, there is only speculation or crypto. And people don't like Bitcoin to be lumped into crypto because that's their way of making Bitcoin scarce. That gets me to the next problem. There's no scarcity. There is an unlimited number of cryptocurrencies. So you can't really have value without there being scarcity because otherwise, why would someone pay for something if there's an unlimited amount of it? So the way that people try to make Bitcoin scarce, which it is because there'll only ever be 21 million Bitcoins, that was baked into the code in the beginning, is by saying that Bitcoin's different from all the other cryptocurrencies.

19:55It is insofar as it's got the first mover advantage, but apart from that, it really isn't. And it maybe has a network effect and everything. But again, that's what we're saying there is Bitcoin's different because it has more belief. It's more established that the belief in it is more established than the others. So again, it's if there's no scarcity and there's nothing fundamentally underpinning that price, there's no bottom, there's no floor. So people say, oh, it's like gold and gold is speculative. Sure, gold is partly speculative. But people, I'm wearing gold. We have gold in our iPhones.

20:28Gold is useful. People like to wear gold. It's a real thing. Bitcoin and cryptocurrencies just represent digital strings of digits. That's all they are. And they are, but people have assigned value to those strings of digits. And once people stop believing, then it will go to nothing because that's all there is. There's nothing else under there. I've been wondering at what point will people decide, because I mean, I find Bitcoin to be a precarious asset as well. I've been wondering at what point will people decide, you know what? We don't believe in this thing anymore. Is this that moment? I don't think that that moment is going to happen all in one go.

21:07I think that moment is starting to happen. And there will be a final kind of death spiral in which everyone quickly runs, tries to run for the exit. We don't seem to be completely there yet because Bitcoin isn't in complete freefall. Cryptocurrencies aren't in complete freefall. There are a huge number of vested interests who will, I mean, that's the thing. That's why I consider it a headless Ponzi scheme, because it's akin to somewhere between a Ponzi scheme, pyramid scheme, multi-level marketing scheme, because it relies on constantly recruiting new people. And it requires also, in crypto's case, it really requires a lot of people who kind of stay and hodl, hold on for dear life, and don't sell.

21:53And you really need people to not sell in order for the death spiral to not occur. You've now got Michael Saylor, who's like the big dog of Bitcoin. I don't know what to call him, but he is the kind of biggest holder of Bitcoin in the world. He, you know, turned his company into a Bitcoin holding company. He's now saying he's going to sell over a billion dollars worth of Bitcoin. So it's not, I don't think it's like necessarily now, but I think that what we're seeing is each time crypto has had a big run up, there's been a narrative, there's been a story for why it's going up. And there has, there's been a reason, right?

22:28So you had in 2017, you had ICO mania. So you had these initial coin offerings, ICOs, that basically people were just like making money out of thin air. Everyone was getting rich and people were just like coming up with these ridiculous tokens and running off with the money. And because people had to buy Ethereum, Ether, the cryptocurrency native to the Ethereum network, that was going up massively in value. and all the other cryptocurrencies were going up with it. So there was that reason for the kind of big boom in 2017. Then you had a later boom was fueled by the NFTs, non-fungible tokens. So if you remember that and the metaverse and Web3 and people were suddenly convinced that, oh my gosh, like this is the future of the internet.

23:12I think that was the dumbest era of markets in my lifetime. Well, NFTs and ICOs, to be honest, it's really hard to know. Fine line. ICOs are arguably worse than NFTs. But yeah, they're both pretty bad. But the most recent run up in prices was a bet on Donald Trump basically being this like crypto president, despite the fact that obviously a few years ago when he was president the first time around, he said that he doesn't believe in Bitcoin crypto. goes. Suddenly, it seems like he had some meetings with some kind of big crypto executives who might have been willing to maybe buy his crypto coin and maybe give him some money.

23:49Suddenly, he was going to be the Bitcoin president, make America the crypto capital of the world. And in that context, we've seen crypto actually doing badly. And so it's kind of like, that was like, when you keep seeing these narratives unraveling, there starts to be like a loss of faith. because it's like, well, hang on, this was meant to be the time. People are putting Bitcoin into their ETFs, into their 401ks. All of these executives have been pardoned and released from prison because Donald Trump was in that setting, in that extremely permissive setting. If crypto is still not thriving and actually doing worse than it was before Trump came in, that seems like a kind of problem because what's the next story?