Anthropic S-1: What Happens to Amazon's Convertible Notes After the IPO
The fair value swings stop only for the part of the notes that converts. At the offering, Anthropic's Amazon notes convert into non-voting Class N common stock up to Amazon's 12% ownership cap, unless Amazon waives it. Principal the cap holds back stays outstanding at fair value, and Anthropic keeps remeasuring it through earnings in its 10-Qs until it converts at a quarter end or Anthropic repays it in cash at maturity.
Key takeaways
- The S-1's pro forma figures assume conversion only up to the cap. The final split depends on the offering size and Amazon's election.
- After the listing, the capped balance converts each quarter end at the lowest of the fixed price, the IPO price and the 10-day average Class A price.
- Diluted EPS equals basic while losses continue. The S-1 excluded 1.84 billion potential note shares as anti-dilutive.
Our post on the $72.4 billion charge explains the fair value option and how $6.2 billion of principal reached a $108.6 billion carrying amount. This one starts at the listing, from Anthropic's registration statement on Form S-1, filed October 26, 2026.
What converts at the offering
The S-1's "Convertible Notes Conversion" covers only the shares Amazon can receive "without causing it to exceed the applicable ownership cap." The capitalization table keeps a convertible notes payable line in its pro forma columns, blank until pricing. The split "will be determined based on the final offering size and Amazon's election with respect to the ownership cap."
The cap has bound before. In three financings, Series E-1 and F-1 in 2025 and Series G-1 in early 2026, part of the 2023 notes converted and Anthropic reissued the rest as a rollover note. The 2024 notes didn't convert in any of them.
What stays outstanding, and for how long
Anthropic reissues blocked principal as a non-interest-bearing rollover note on "substantially identical terms," and says that note "remains subject to fair value measurement." The balance shrinks three ways:
- Quarter-end conversion. At each fiscal quarter end after the offering, it converts up to the cap at the lowest of the fixed price ($2.0928 for the 2023 notes, $5.0478 for the 2024 notes), the IPO price and the 10-day trailing volume-weighted average price of Class A.
- A waiver. Amazon can waive the cap and take more shares.
- Maturity. Anthropic repays in cash whatever the cap still blocks at maturity: March 2034 for the 2023 note, and January, May and November 2035 for the 2024 notes. Amazon can instead elect set-off against amounts it owes Anthropic under their commercial agreements.
A second fair value item continues: Anthropic's 2026 note purchase agreements with Google and Amazon "are marked-to-market each period" through other income (expense), net.
Will a share price make the valuation easier?
The S-1 doesn't say. Anthropic's scenario model takes as inputs the fair value of the stock the notes convert into, the timing of conversion and how much the cap lets through. Its accounting policies say it must estimate its common stock's fair value "until the Company's common stock is publicly traded."
We read that to mean the largest input becomes a quoted price once Class A trades. The post-IPO conversion price can't exceed the 10-day average, so the notes stay at least at the money and their fair value should follow the share price. The cap still sets the amount that converts each quarter, and no market quotes that. That judgment decides whether the notes leave Level 3.
What the first public 10-Qs will show
- The income statement line. "Change in fair value of convertible notes, derivative liabilities, and SAFEs" continues while any Amazon note is outstanding. ASC 825-10-50-30 requires the fair value gains and losses in earnings for each period, and the line that reports them.
- The Level 3 roll-forward. ASC 820-10-50-2(c) requires an opening-to-closing reconciliation with earnings effects and settlements as separate items. The S-1's version shows first-half 2026 conversions of $5.5 billion on their own line, and we expect the IPO and quarter-end conversions there too.
- Unobservable inputs. ASC 820-10-50-2(bbb) asks public companies for quantitative information on significant Level 3 inputs, including range and weighted average.
Our ASC 820 disclosure guide lists the full set.
Fina worked the same question against the S-1 and ASC 825: Fina's cited analysis of how Anthropic accounts for the Amazon notes after the IPO.
Diluted EPS and the Class N shares
Class A and Class N carry the same economic rights, so Anthropic reports one combined figure: a $(39.88) net loss per share, basic and diluted, for the first half of 2026. The S-1 left 1,840,445 thousand potential note shares out as anti-dilutive.
In a profitable period, Anthropic's policy applies the if-converted method if dilutive. ASC 260-10-45-40 assumes conversion at the start of the period, adds the shares to the denominator and adjusts the numerator for the debt's charges. For a note carried at fair value, we read that as removing the remeasurement. Anthropic takes that step in its pro forma net loss per share, which eliminates "the change in fair value recognized related to the Convertible Notes Conversion."
Amazon's Class N shares aren't listed or registered under the Securities Act and carry no vote except where law requires one. They convert one-for-one into Class A on a registered offering or open-market sale, or on a transfer to a third party that isn't a Class N holder and won't own more than 9.99% of any class. Lock-up agreements cover holders of "substantially all" of Anthropic's stock, and certain Class N holders have registration rights.
For the investor side, see what Amazon's and other public companies' SEC filings reveal about their Anthropic stakes.
Read the full analysis
Fina's cited analysis of how Anthropic accounts for the Amazon notes after the IPO follows the election through each quarterly conversion, citing the S-1 and the Codification.
