As we've been documenting extensively here at the Fool, investors all around the globe are bracing for the imminent initial public offering (IPO) of Anthropic. Anthropic is one of the leading AI companies in the world. It is most famous for its cutting-edge Claude platform, which has exploded in popularity over the past year or two.
Now, Anthropic is hoping to turn its financial success into a successful float on the public markets. The IPO has been scheduled for next week on Thursday, 19 November (US time), and plans on raising as much as US$65 billion. If that all goes to plan, it would give Anthropic a market capitalisation well over US$1 trillion.
As you may already be aware, Anthropic is copying the playbook first pioneered by SpaceX by offering investors all over the world a chance to directly participate in this IPO. I've already had numerous emails from my own brokers asking if I want to participate in this 'exclusive opportunity'.
Now, despite Anthropic's blistering growth, I've already laid out why I won't be participating in the Anthropic IPO, and why I think most investors should be careful if they wish to do so. However, there's another aspect of this company that I wish to discuss today. One that raises even more red flags for me as an investor.
It is none other than this company's proposed share structure.
Image source: Getty Images
Share classes: One is good, more must be better?
If you weren't aware, a minority of US stocks often employ multi-tiered share structures. These companies are usually tech stocks, and use different classes of shares in order to allow their founder and early investors to retain control whilst being able to dilute their financial stake in the company.
For example, Google-owner Alphabet has three classes of shares. There's Class A (which uses the ticker 'GOOGL'), Class C ('GOOG'), and Class B. Class A shares are traded on the NASDAQ stock exchange and give their owner one vote per share. Class C shares are also publicly traded, but don't come with any voting rights. To be clear, Class C shares still grant ownership and rights to a share of the company's profits. Just not a say in how things are run at Alphabet. Class B shares, however, are not publicly traded; the only people who own them are Alphabet founders Larry Page and Sergey Brin, and some other early investors.
These shares carry ten votes per share. This means that their owners are always able to get more than 50% of the vote at any shareholder meeting if they wish, despite owning a far smaller financial stake in Alphabet. Some call this American arrangement unfair and anti-democratic. Others argue it allows founders to hold to their long-term vision for the company. Whatever your views on this setup, it is legal and accepted in America. And it's a model Anthropic wishes to emulate.
Anthropic's many faces
According to its IPO prospectus, Anthropic is planning on issuing no fewer than five classes of shares: Class F, Class T, Class E, Class N, and Class A.
Ordinary investors like you or me will only be able to purchase Class A shares on the NASDAQ when Anthropic IPOs. Thankfully, these shares will have one vote each, giving investors some say in corporate matters.
However, when it comes to electing members of Anthropic's Board of Directors, the influence will be minimal, if not non-existent. Anthropic's seven co-founders will reportedly own Class F shares. These will allow these seven people to have 50.1% voting power, as well as the unfettered ability to select three of Anthropic's seven board directors.
The other four members of Anthropic's board will be selected by holders of Class T shares. These shares will only be held by members of a Long-Term Benefit Trust (LTBT).
The other two classes of shares that Anthropic will offer are the N class and the E class.
Class N shares will reportedly be owned by "strategic business partners", which would probably include other tech giants like Alphabet, Amazon, or NVIDIA. These shares are similar to Class A, without the right to vote on most corporate matters.
Meanwhile, Class E shares will be designated to Anthropic employees. These shares also come with only limited voting rights. Interestingly, Anthropic has already announced that, if the company ever pays out a dividend in the future, only holders of Class A and Class N shares will be eligible to receive it.
Foolish takeaway
If this is confusing for any readers, I wouldn't blame them. Anthropic has opted for a highly complex and unusual share structure here. That doesn't appeal to me at all. Shareholders are owners of a company, so they should arguably have the right to have a say in who is running the show. Excluding ordinary shareholders from having influence over their board of directors is an interesting choice, and not one I would want to support.
Together with the other concerns that I've previously raised about this IPO, this all adds up to a rather unattractive IPO in my view. Of course, Anthropic shares could pop when they float, making me look foolish for preaching caution here. However, I like companies that treat shareholders as equal partners. Anthropic is going down a different path.
