Anthropic and OpenAI are preparing for stock market listings, drawing attention to investment products that hold unlisted shares of both artificial intelligence companies. Jang Chi-young, a researcher at Hana Securities, identified exchange-traded funds and closed-end funds as methods for investors to gain exposure to these companies before their initial public offerings. Both product types are listed on exchanges and can be traded like regular stocks, with Securities and Exchange Commission regulations limiting unlisted stock holdings in ETFs to a maximum of 15 percent of total assets.
ETFs Offer Direct Access to Anthropic and OpenAI Unlisted Shares
According to Jang, ETF products provide a straightforward method to hold unlisted stocks. Current holdings of Anthropic and OpenAI within ETFs remain at low levels, though Jang noted that future revaluations of company values could lead to increased allocation percentages within these funds. For investors seeking exposure to both companies before IPO, Jang highlighted CNEQ and ALAI for higher Anthropic holdings, and TTEQ for simultaneous exposure to both companies.
CNEQ concentrates investments in large-cap US growth stocks, maintaining fewer than 30 constituent stocks with the top five holdings comprising approximately 40 percent of the portfolio. Current holdings include NVIDIA at 13.3 percent, Microsoft at 6.1 percent, TSMC at 5.8 percent, Alphabet at 5.7 percent, and Anthropic at 5.5 percent. ALAI holds Anthropic at 3.02 percent and invests broadly in companies that develop or utilize AI technology, with approximately 70 constituent stocks providing higher diversification compared to CNEQ. TTEQ holds both Anthropic at 0.9 percent and OpenAI at 0.47 percent, with nine of its top 10 holdings being semiconductor-related companies, positioning the fund to benefit from AI infrastructure investment expansion according to Jang.
Share Dilution and Valuation Lag Present Risks in ETF Holdings
Jang identified two considerations for ETF investors. Capital inflows can lead to share dilution because unlisted stocks have limited liquidity, making it difficult to expand holdings at the pace of fund inflows. NASA experienced this effect in May when rapid capital inflows caused its SpaceX holdings to decline from 10.7 percent to 4.6 percent.
The reflection of unlisted stock values in ETF net asset value can experience delays. ETFs use indirect ownership methods such as special purpose vehicles when holding unlisted stocks. Since unlisted stocks lack exchange-traded prices, values are determined through SPV or asset manager assessments, creating a time lag between company revaluations and NAV updates. Jang cited XOVR, which held 10 percent in SpaceX, as an example where NAV tracked closely with the underlying index excluding unlisted stocks even during a period when SpaceX's company value increased more than fourfold, resulting in limited outperformance versus the base index.
Closed-End Funds Provide Higher Exposure Without Ownership Limits
Exchange-listed closed-end funds offer another option for holding unlisted shares in advance of IPOs. These funds face no restrictions on unlisted stock allocation percentages, making them suitable for investors seeking higher exposure to unlisted companies. DXYZ and VCX currently hold combined Anthropic and OpenAI positions of 23.9 percent and 28.9 percent respectively. Fixed share counts provide relative freedom from dilution issues associated with capital inflows.
Price Distortion Risk Affects Closed-End Fund Market Values
Market price distortion presents a risk factor for closed-end fund investors. Increased market demand can expand the premium of trading prices relative to NAV. Conversely, growth in alternative investment options can reduce demand and create discounts. Jang advised investors to verify the level of market price premium relative to NAV at the point of entry.
FAQ
What percentage of unlisted stocks can ETFs hold under SEC regulations?
SEC regulations limit the total allocation of unlisted stocks within ETFs to 15 percent of total assets.
Which ETFs hold the highest percentages of Anthropic shares?
CNEQ holds Anthropic at 5.5 percent of its portfolio, while ALAI holds Anthropic at 3.02 percent. TTEQ holds both Anthropic at 0.9 percent and OpenAI at 0.47 percent.
What is the combined Anthropic and OpenAI allocation in closed-end funds DXYZ and VCX?
DXYZ holds a combined 23.9 percent allocation in Anthropic and OpenAI, while VCX holds a combined 28.9 percent allocation in both companies.
