Welcome to the week from Prof G Media, where we break down what mattered and what it all means. I'm George Hahn, and it's Friday, October 2nd. Today, Oura postpones its IPO and what investors should watch for when companies go public. Then, can AI agents save you money by taking on chores you hate? And finally, how America's war with Iran is hurting Ukraine and hitting Americans' wallets. Let's get into it.
To start, Oura, the company behind the health-tracking smart ring, has postponed its IPO, citing market uncertainty. On Prof G Markets, Ed asked IPO expert Jay Ritter what companies are looking for when they go public and what might give investors pause.
What exactly is a company looking for when they go public?
They're looking for liquidity and raising capital, and possibly a currency for making acquisitions. As a public company, you can do a stock-for-stock deal to acquire another company. Now here, the company is not burning cash, you know, unlike Anthropic, where they have a huge cash burn rate. That the company does have the luxury of not going public because it's not needing the cash. I think with a lot of companies, they get lofty expectations about what their value should be. Institutional investors who are looking at it are worried: could this be the next GoPro, or a company like Peloton, or a company that never did go public 11 years ago? SoulCycle was also a rapidly growing company that was about to go public and postponed going public. They never have gone public. But all of these can be viewed as kind of one-trick ponies where they were growing rapidly but are going to be hitting a wall in terms of growth. Like with GoPro, a lot of people who wanted the GoPro camera bought it already, and, you know, they don't wear out immediately. They don't need to be replaced. And the market was not exploding with continued growth. And I think some investors have the concern here that with the Oura Ring, well, they've got a great product, but it's not as if there aren't any competing products for, you know, personal health measurement. And just how big is the market, how profitable is it going to be? It doesn't have the upside of a company like Anthropic.
But does postponing mean waiting for a better moment or missing the window altogether? Jay pointed to the history of companies that have put their IPOs on hold.
Historically, the majority of companies that have paused their IPOs have never gone public. Some like SoulCycle get acquired. You know, sometimes at a good price, you know, sometimes at more of a fire-sale price or conservative valuation. Yeah. You know, what's difficult for companies is to execute the business model. You know, stuff happens. A company can be firing on all cylinders, but competition comes along or the demand evaporates. You know, sometimes for things outside of its control, and nobody can foresee the future with certainty. But given the track record of companies that have postponed their IPO, where most of the time they never do go public, that's the most likely outcome here. If they continue to execute, this might be a good decision. They might wind up being able to go public at an even higher valuation a year or two from now, but who knows? It could be like the autumn of 2007, where if you waited a little longer, you might have had to wait for many years.
Meanwhile, a draft of Anthropic's IPO filing leaked. According to Reuters, the company brought in $4.6 billion in revenue last year with an operating loss of $8 billion and a net loss of $42 billion. Anthropic is expected to go public in November at a valuation of around $2 trillion, which would make it the most highly valued IPO of all time. Ed asked Paul Kadrski, managing partner at SK Ventures, whether that price makes sense.
It's a ridiculous price, and it's then, and it's, as friends of mine were saying this morning, some of the largest hedge funds in the world looking at this, and it's like anyone who thinks that being the buyer at these kinds of prices in a very late-stage IPO of what amounts to a relatively mature company, when you look around the poker table and wonder who the sucker is, it's you. Because not because it's a bad business, just because what's happening is this is not a financing event anymore. They're not raising money for anything other. What's really going on is people are unloading shares. They're unloading shares on retail investors and on quick-flip institutions, and we're able to back in and out. So you have to look at it accordingly and realize that this is really what they're saying is this seems like a good time to get out, and I'm an insider and I want out.
Anthropic's IPO was supposed to be the biggest AI story of the coming months. Instead, last week belonged to Meta and its new AI agent Muse, which is built for everyday consumers. This week on The Prof G Pod, writer and investor Jack Raines spoke with his friend and fellow VC JC Barreto. They discussed why some companies are welcoming AI agents and others are resisting them.
But it is funny seeing like who's leaning into agents and who is saying like, no, like we don't want this. There's a real like bifurcation in the market of like just consumer interfaces right now.
Yeah. I mean, my like my observation on it so far is it totally depends on the business model, right? And like I think it was last week when Muse was just like banging out like announcements about new integrations, right? They had Shopify, they had PayPal, they had Expedia, and they had Instacart all in the span of a couple days when Amazon also came out and said, "No, you can't do this." But like if you think about those business models, right, like Expedia and Instacart in particular, like they don't want to be disintermediated by agents that can go do all of these things without them being there, right? So I mean, their incentive surely is like if we don't do this, then the agents can either bypass us or go to Booking.com or Kayak or DoorDash instead. And so we have to do this for fear of existential risk on our business model. And then PayPal and Shopify, they don't care. Like, they make money as long as money flows. So if an agent does it or a human does it, it doesn't matter. Like the pie is just going to grow for them. And so they just need to make sure that they're in the transaction flow and the payment flow regardless of who the end user ends up being.
For consumers, the promise is simple. Let an agent deal with the tedious tasks that cost us time and money. Think cancelling subscriptions, chasing refunds, or sitting on hold with customer service. For companies that profit when we give up, that could be a problem. Here's Jack on what's known as the annoyance economy.
