Transcription
We need to talk about the upcoming SpaceX, OpenAI, and Anthropic IPOs because there's a play being run on the American public right now. And I know it because I've run the same play before in my career.
Three of the biggest companies in the entirety of human history, helmed by three of the richest individuals ever created on planet Earth, are sprinting toward three of the largest initial public offerings of any companies ever at almost the exact same time. Now, none of these men need money. They are as rich as rich gets. So this raises the question, why are these three men who reign over three of the largest empires on earth in such a hurry to sell the most valuable company shares ever known to mankind away from their companies, giving up pieces of control and instead selling those shares to regular mom and pop investors like you and me.
The reason is that there's a fuse burning down. And it's one that's almost invisible from the outside, but impossible to miss once you look on the inside. And while it burns, these men are racing to do one thing, which is to cash out a prophecy at the top before the rest of us see what's really underneath it. And that prophecy that AI is driving a once-in-a-generation change in every facet of our lives has been wrapped up in a number so big and pushed by so much media that it's starting to feel like a foregone conclusion when the data shows it's anything but. It's a play a Nobel Prizewinning economist spent his entire career documenting. And it's one already driving irreversible decisions in our kids' education and our businesses and our investments and our careers. And if the prophecy turns out wrong, we're the ones left holding the bag with decisions we can't undo.
I'm Brendan Dell. This is the leverage class. Let's see through it.
To understand what's happening with these three IPOs, we need to go back to 2019 and to this man, Adam Newman, the CEO of WeWork and what became one of the most public IPO disasters in technology history. Because if we don't understand what happened to WeWork, we won't see it coming when CEOs run the same playbook like they are right now. So WeWork with shared office space dressed up as a technology company with the, let's call it, lofty mission of elevating the world's consciousness.
So in August of 2019, Adam did what OpenAI and SpaceX and Anthropic are doing right now, which is starting the process of going public. And to do that, he filed an S1, which is the document where a company finally shows the public what's behind the curtain. And the thing about companies growing this fast is they spend far more money than they earn. In a normal business, it's limited by its sales. But a company like this is limited only by how much money it can raise. And said plainly, that's by convincing the next investor to pay more than the last, no matter what the company actually earns. And once they raise that first round, the fuse is lit. Every fundraising round has to come in higher and higher and higher than the last, which leaves only two ways out. The first, make enough sales that it never has to raise again, or the second, keep raising at higher and higher and higher numbers until the only buyer left big enough is us, the public. And in the case of WeWork, the fuse burned all the way down.
So in the first six months of 2019, WeWork brought in $1.54 billion in revenue and lost more than $900 million. So for every dollar that WeWork took in, it spent about $1.60. So it was losing roughly $0.60 on every dollar of business that it did. And yet Newman filed that valuation of $47 billion. For context, WeWork had a competitor, IWG, which was the parent company of Regis, and they were running essentially the exact same business, which is short-term office space, except IWG was actually profitable, and they had about 10 times the footprint. They just didn't dress themselves up in a technology costume. So, at that time, IWG was worth about a tenth of WeWork.
When a reporter asked how a company losing so much money could be worth $47 billion, Newman, instead of pointing to the numbers, pointed to the company's quote "energy and spirituality." The word "energy" appeared in their filing 13 times. They even invented a new financial metric, "community-adjusted EBITDA," and it subtracted not just interest, taxes, depreciation, and amortization, but basic costs like marketing and design. EBITDA is already the metric that Charlie Munger said to mentally replace with the words "earnings." Community-adjusted EBITDA is pure prophecy. So when you subtract the prophecy and look at the fundamentals, this was a 15x price-to-sales ratio for shared office space dressed up as technology. Now hold that number, the 15x, because as crazy as it was at that time, it's about to look like an absolute bargain next to SpaceX, OpenAI, and Anthropic.
So here in the WeWork story is what makes it even worse. Even as Newman sold the story that the profits would flow once they'd, you know, quote, "elevated the world's consciousness through tiny glass cubicles and free shared coffee," he had already pulled more than $700 million out of the company. Some of it was through stock sales, most of it was borrowed against his shares. So, you know, so much for the free beer on Fridays, lifting up the whole of humanity with it. Whatever Newman believed, his actions told the real story. He was cashing out at the top before the prophecy could meet reality. And then the filing went public. In the six weeks that followed, the valuation collapsed and went from $47 billion to under $10 billion. The whole IPO was withdrawn and Newman was pushed out as CEO. SoftBank took over what was left at under $8 billion.
But what does a failed office space IPO have to do with the three largest initial public offerings in human history? Well, it turns out something very fundamental.
So before we get to that, a lot of folks out there are trying to decide what to do next in their careers. I personally want three things out of work. I want work I enjoy doing. I want relative time freedom. And I want diversified income far in excess of what I need. The way that I originally built this for myself was with consulting. And after many years, my clients were signing my S1s, wondering how I'd been able to put that business together. So I built some modules for them which started getting shared, which I turned into a course called "The Freelance Formula." It's a program for mid-career professionals who want to build their own independent business. So, right now, you can get that full program for $99. The link is below.
With that, back to the content.
So, these three companies are running the exact same playbook, using an elaborate prophecy to justify numbers with no tether to reality. And they are doing so at a very unique moment in human history where a collision of events is forcing these men to sprint toward an exit before the fuse burns all the way down. So here's where things stand. SpaceX, which is Elon Musk's rocket company, has already filed publicly. It's targeting an IPO as soon as June 12th at a valuation of about $1.77 trillion, which will make it the seventh most valuable company in America. OpenAI, the maker of ChatGPT, is preparing its own IPO, reportedly targeting somewhere around $900 billion, and Anthropic, who has also recently filed, is targeting roughly $900 billion as well.
Now, to understand how staggering these numbers are, you need only one number for comparison. The largest IPO in human history was Saudi Aramco back in 2019, and it raised about $29 billion. SpaceX alone is expected to raise as much as $75 billion, which is more than double the biggest IPO ever, and it's only one of the three. To put all three together in context, across the entire last decade, from 2016 through 2025, every IPO in the United States combined raised about $469 billion. These three companies are looking to raise that much money in a matter of months.
And all three are propped up on one prophecy: Artificial intelligence is a world-changing technology that will drive mass unemployment, transform the way we do business, and alter every part of our lives. But the data is slowly revealing that this prophecy is not keeping pace with the promise. You couple this with rising rates, meaning the cost of money is climbing at the worst possible moment for companies that survive by raising it. And what we see is the fuse is burning hotter and hotter. And these men are in a race to convert their prophecy into cash before it burns all the way down.
Now, I've spent my entire career on the other side of this. I've helped raise hundreds of millions of dollars for some of the fastest-growing startups in the world, using the exact same narrative structure these companies are running now, and it has always followed the same three beats. The first is, "The world has already changed." The second is, "There will be winners and losers in the wake of this change." And the third is, "If you don't adopt our technology to keep up, you will be left behind." Except that this time, the prophecy isn't limited to a defensible niche. It is a global claim of transformation.
Now, let's watch the filings run the same play. So, our friend Adam Newman opened his S1 with a promise to "elevate the world's consciousness." Now, fast forward to page seven of SpaceX's S1. SpaceX is going to "make life multiplanetary, understand the true nature of the universe, and extend the light of consciousness to the stars." This S1 is filled with pages and pages of rockets and beautiful photography and images of the future. And the mission is so lofty that they have identified what they say is the largest actionable total addressable market in human history: $28.5 trillion.
Now, before the Musk fans tell me that he's actually doing exactly that, I want to take a second to look at what a normal S1 looks like. So, this is Reddit's S1, and it is Met Gala dressed up compared to most. If you look at these documents, they are traditionally the most boring documents drafted by humankind. It's walls of text. It's by lawyers for lawyers. And when you look at Reddit's, at least one thing is clear: They are at the very least talking about the actual business that they're running, which is online communities.
Now, there is an old Wall Street proverb for this: "He who lives by the crystal ball is destined to eat broken glass." Because when you actually read these three filings, that is exactly what they are. They are crystal balls. It's prophecies about a future that has almost nothing to do with what these companies do today.
So, let's start with SpaceX. In 2025, it brought in $18.7 billion and lost $4.9 billion. The only part of the SpaceX conglomerate that makes money is Starlink, which is satellite internet. That made $11.4 billion in revenue and $4.4 billion in profit. Now, that is a great business. It has absolutely nothing to do with extending the light of consciousness to the stars. It is internet for places where cables don't run. Now, remember the $28.5 trillion TAM that they claimed, which is the largest in human history? Starlink, the only part that makes any money, is about $1.6 trillion of that, which is under 6%. The other 93% is all AI, which lost more than $6 billion on its own last year. So the only reason the whole company loss isn't basically catastrophic is because of Starlink. So this prophecy of a $28 trillion TAM is wholly dependent upon AI, which at present state does nothing but lose money. So you strip away the crystal ball, and you have a $1.7 trillion company which is satellite internet and a word calculator.
And when you look closer at OpenAI, you see the same hyperbole throughout. OpenAI's mission is to ensure that artificial general intelligence benefits all of humanity. Its charter even says that its primary fiduciary duty is to humanity itself. Ammeday, the CEO of Anthropic, wrote an essay entitled "Machines of Loving Grace," describing AI as a quote "nation of geniuses in a data center." This begs the question, have these guys actually ever used their products? Incredibly useful? Absolutely. A machine of loving grace or nation of geniuses in a data center? It's not even close.
But behind the lofty prophecies, it's in the numbers where we really start to see the fuse burning down. So, OpenAI is promised $1.4 trillion in spending against $20 billion in revenue, which means it can never stop raising and selling the prophecy, or the bills will bury it. And Anthropic's valuation jumped more than $600 billion in 10 weeks. And that was without raising another dollar or changing the business at all. This was all on nothing but a story it told about a model quote "that was too dangerous to release," which we cover in another video. I'll link it at the end. Yes, revenue grew, but nowhere near enough to justify the valuation.
And the commonality between these three companies and WeWork is what Nobel economist Robert Shiller calls "narrative economics," which plainly said means markets don't move on numbers, they move on the stories people tell each other about the numbers. And in the paper that helped him win the Nobel Prize, Shiller measured a century of stock prices and found that they swung five to 13 times more than the actual earnings underneath could ever justify. And almost every time when the fundamentals detach from reality, it's the same underlying mechanism. People tell each other, "This time it's different." "This technology or this innovation, this this time." Somehow the rules don't apply. And this is how WeWork initially justified what seemed by this standard to be a downright conservative 15x sales-to-valuation multiple. Except history tells us that this time isn't different. History rhymes. The madness of crowds is real. If you strip away the crystal ball, and these three companies are satellite internet and two very expensive word calculators, and the valuation at present has nothing to do with the actual businesses, it relies entirely on prophecy to deliver.
Which leaves us with the most important question: If the future is so bright for these companies, why are they in such a rush to go public? And then who is left holding the bag if the prophecy breaks?
We need to understand two forces in parallel. The first is the bond market. The bond market is the basis of all markets. When rates rise, money gets expensive everywhere. Okay? And said plainly, these companies are running out of greater fools. The private money that's been funding them at higher and higher and higher valuations is finite. And the cheap money that made it possible was gone. And the 10-year Treasury that sets the price of the money fell, then turned and climbed right back up just as these IPOs line up.
The second force we have to understand is the story itself is starting to crack. So the predictions that are building these absolutely world-shifting valuations aren't landing. Mass unemployment is not being realized. Bane's 2026 technology analysis found that while 81% of companies have moved past AI pilots, only about 12% have embedded AI into core processes and realized value across use cases, typically reached only 10 to 25%. And even the CEOs are starting to walk back their claims. Sam Altman, who spent years warning that AI is going to wipe out all of the white-collar jobs, now says he's, you know, quote, "delighted to be wrong about it" right as he heads for the exit. So the fuse is burning from both ends. These companies have to move now.
Now, we have to turn back to this number, 15x. So Jay Ritter is a University of Florida professor known as Mr. IPO, and he spent his entire career tracking the IPOs of more than 8,000 companies since 1979. And what he learned is that there is one number that tracks whether a company will be a winner or loser for the average investor after that offering, and it's price to sales. When that ratio goes above 40, meaning it would take 40 years of sales to pay back the price of the valuation, IPOs underperform the market by nearly 60% over three years. So let's flash back to the WeWork catastrophe. That was 15 times sales, not even halfway to Ritter's danger line. SpaceX is coming in somewhere between 60 and 100, and OpenAI and Anthropic are going to be both well above 40. And in Ritter's own words, "They may be great companies, but at these prices, it would be very difficult for an investor to come out ahead in three years."
And the moment these companies list, the major index funds are going to fold them into ordinary retirement funds within days. So, if you own any kind of index fund, you're going to own these at normal prices whether you choose to or not. So, that's who's holding the bag when the prophecy breaks. It's people like you and me.
So, three of the richest men in human history are sprinting to bring three of the most highly valued companies ever public at record-breaking valuations that have never been seen before. And it's not my intention to predict where these stocks will or will not land. It's simply this: My entire thesis around AI comes down to this old adage: "Those who live by the crystal ball are destined to eat broken glass." If we can't learn to see past the stories to the fundamentals behind them, we become pawns in narrative economics. And we give our leverage away to stories and prophecies that serve them and not us. And ultimately, we make decisions about our education and careers and lives based on prophecies that may simply never come true.
Now, we've seen through it.
So, if you'd like to see how AI companies are using story to justify their narratives, watch the "Circus Trick" video next. And if you'd like to see why the job loss narrative is so overstated, watch the MIT video next.