A glossary to help understand what happens in an initial public offering

Anyone following Anthropic's plans to sell shares to the public is likely to hear terms thrown around that describe steps and components of an initial public offering. Here's a quick guide.

Initial public offering, or IPO

A company's first offering of stock to the public. It is the first time a company's value will be determined by a public market.

Prospectus

A formal offer to sell shares in the company. It also includes a business plan with details about the company's finances and operations. Also known as an S-1, after the Securities and Exchange Commission form.

Listing

This describes the ticker symbol for the stock and the public exchange where it is being traded. For example, Apple is traded as “AAPL” on the Nasdaq and Macy's is traded as “M” on the New York Stock Exchange. Anthropic plans to list on the Nasdaq under the symbol “ANT.”

Underwriter

An underwriter is a bank or other financial institution that acts as the intermediary between the company and investors. They purchase the stock being issued by the company in the IPO and sell it to the public. There are often several underwriters involved to share the risk. The lead underwriters for the Anthropic IPO are Goldman Sachs and Morgan Stanley.

Roadshow

The name for the presentations given by company executives and underwriters to potential investors, typically institutional investors, before the company issues its shares.

Lockup

This is the period of time when executives, insiders and early investors are legally prohibited from selling their shares. It is typically 90 or 180 days and is meant to prevent insiders from quickly cashing out or dumping their shares. Anthropic said that directors, officers and holders of “substantially” all of its capital stock have agreed to a 180-day lockup period, while co-founders and certain stockholders have agreed to a 365-day lockup.

Over-allotment

This is a provision that allows underwriters of an IPO to sell more shares than initially planned. It is meant to meet unexpectedly high demand or to help stabilize the stock price.

Price range

This is an estimated range for the price of the shares the company is offering provided before the stock is publicly traded. Investors place bids within that range before the listing price is determined. Anthropic set a price range between $70 and $78.

Price discovery

This describes the broader process undertaken by the company and underwriters to determine the listing price for the stock. It attempts to balance demand for the stock with the potential supply of shares. The process typically takes longer when an IPO has high interest from potential investors.