If AI business is greatest business ever, why are they doing IPO? | Hacker News Reader

If AI business is greatest business ever, why are they doing IPO?

3 pointsOnuRC5 comments

I understand need for more money and more compute. But if they are so advance and great. Why are their own private investors and private share holders letting this multiple trillion $ opportunity go away? Private markets and family offices are big at $trillion level. Sure they could raise until Z letter in private rounds, stay private like some companies be able to for for their entire time? Why sell ownership of the greatest business ever created?

Standard Oil never went public, they had more than 10% of the GDP at top and true, self advancing AI would worth multiple times higher? There is not even monopoly breakdown risk because there are already multiple competitors.

Or simply put, they don't believe the current valuation justifies significant future growth. They need to exit their position, especially given the risk of volatility around the current valuation?

- Risk mitigation. Even if you are 90% sure that things will go up and to the right, it still might make sense to cash out a bit as insurance. Especially if you aren't giving up any control

- Buying allies. If you make a lot of other people rich, they will probably become your biggest boosters. Might not be a bad idea to have some rich allies rooting for you. And you might need some political favors in the future.

Also it's a race, with theoretically exponentially compounding gains to the winner(s). So trading 10% dilution for capital that will exponentially compound, may mean that e.g. a 10% dilution now results in 50% greater market cap in 5-10 years, or 10% dilution now means the difference between winning or coming in 4th, which could be a 10x or 100x difference in market cap.

The current astronomical valuations push even those people with the highest risk tolerances toward diversifying. Even if you assume with 100% certainty that the AI sector will be the end-game of capitalism, you can't assume that your company will succeed. Better to hedge your bets and sell part of your company, buying shares in all your competitors with the proceeds.

Using a dual class stock structure, you could even retain complete control of your own company while gaining partial or complete control of others with the proceeds of the IPO. My understanding is that private companies usually don't have dual class share structures until they are preparing to IPO. By IPOing in this manner, you are giving patronage to the investing public without ceding control of the company's assets and operations, in exchange for a boatload of cash right now.

I believe the music will stop soon, and people are cashing in.

Pump and dump and move to Argentina.

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