If You Think the Anthropic IPO Will Be a Bust, Here’s How to Profit

Anthropic (ANT) is expected to go public very soon. Between now and the first week or so after it does come to market, we can expect to hear all about it, from every possible angle. 

Getting the AI leaders into the public eye, and assigning “mark to market” valuations to them every trading day is a very good thing. However, that’s not the same as saying that Anthropic, which will take the ticker symbol ANT, will be successful in its early weeks and months as a public company stock.

After all, we are only a few months removed from the roller coaster that is SpaceX (SPCX). It came, it flew, and then it dove as if shot out of the sky. Only to rise again, like a phoenix. And end up above the $135 offering price, but well below where anyone bought it in the frenzy that was the first few days.

That yellow line I drew in above is in the neighborhood of that $135 IPO price. Here’s another way to look at it (below). $225 to $105, that’s a nice range, if you like jackrabbits.

SPCX is about a $2 trillion stock. Anthropic could be that or more. So while much of Wall Street will drill down to the numbers, projections and what’s in the endless pages of risk disclosures (including that existential threat to humanity stuff everyone’s talking about), I am taking a different path. 

Just as I did with SPCX earlier this year, I’m looking at it this way:

1. ANT is bound to be an emotional trade for a while. So if there’s an opportunity to exploit that emotion for profit, I’m game.
2. Owning ANT will be easy, once it starts trading in the aftermarket. If it goes up 50% in its first month (NOT a prediction), owning that ticker or one of the leveraged ETFs that will follow the IPO by a few days at most, will be straightforward.
3. An option collar, which worked very nicely for SPCX, is something I’ll likely do, if only because I want to see if it works as well as my SPCX trade did. And with a collar, I set the worst-case downside scenario up front. So I can risk exactly the dollar amount I prefer. Once the stock and options are available, I’ll share what I do. Even if I pass on it, I’ll aim to produce some type of sample trade.

Be the Aardvark?

That’s all the ANT bull chatter for now. But what if you see ANT, realize the risks, including the fact that 20% of its revenue comes from just two customers, the endless need for capital, the questionable return on investment outcome, etc., and want to try to profit from a busted IPO? Even initially. Just as with SPCX’s more-than-50% nosedive from mid-June through early August?

I’ll admit that when my Baby Boomer-aged brain heard the ticker symbol for the Anthropic IPO, my thoughts went immediately back to a 1970s cartoon, The Ant and the Aardvark.

Every episode followed the exact same premise. The little red ant thought he was completely invincible, darting across the screen without a care in the world. Meanwhile, the world-weary blue aardvark spent all his time calculating the angles, setting traps, and getting ready to vacuum up the ant the moment it overplayed its hand. I can still remember his New York accent: “Hey Ant!”

Back to the upcoming ANT IPO, we know that retail investors and algorithm-driven momentum traders are already preparing to chase the hype. They view the debut of Claude’s parent company as the crowning liquidity event of the entire artificial intelligence boom.

Me? I’m preparing The Aardvark List: a set of strategies that can be deployed with the specific intent of profiting when the post-IPO valuation fever breaks. 

Note that the collar can be part of that. Buy 100 shares of ANT, then buy “convexity” (deep out of the money) put options on it. And perhaps write covered calls to fund some of that downside “investment.” 

When an IPO is priced for perfection in a frothy tape, any execution friction turns the “ant” into prey. And the aardvarks will be waiting. Based on what Anthopic’s business model and ecosystem appears to be, here are a few ETFs I’ll be checking back on to see if there’s a bearish setup to pounce on. 

Direxion Daily Semiconductor Bear 3X Shares (SOXS) 

Anthropic’s entire business model is tethered to high-end compute availability and memory bandwidth. If enterprise AI spend hesitates or chip lead times compress, semiconductor stocks will again lead the market lower. A tactical slice of SOXS can be an aggressive counterweight.

ProShares Short QQQ (PSQ) and UltraShort QQQ (QID) 

Because Anthropic’s primary backers and computer providers are mega-caps like Alphabet, Amazon, and Microsoft, broader tech sentiment dictates the stock’s trading multiple. PSQ offers a straight -1x hedge against tech distribution, while QID delivers -2x daily exposure for rapid-response downside momentum. Keep in mind that the math of investment loss can work against you with these. That is, if you lose 20%, you need to make 25% just to get back to even.

Single-Stock Inverse ANT ETFs (In Registration)

Just as leveraged issuers rolled out geared products for major tech listings, fund sponsors are preparing to launch dedicated -1x and -2x daily inverse Anthropic ETFs shortly after the ANT ticker begins trading.

The stock market needs Anthropic to come public, to help bring transparency to the ongoing path from here to AI’s future. But that doesn’t mean it is a one-way street. So I’m preparing to be an aardvark, just in case.

Rob Isbitts is a semi-retired CIO, former fiduciary investment advisor, Barchart columnist, and straight-talker. Download his new free e-book on hedged bond investing for retirement at ETFYourself.com. His research and model portfolios are at ROAR.PiTrade.com.  

On the date of publication, Rob Isbitts did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.