Sam Altman, CEO of OpenAI, during an event in Seoul, South Korea, on Friday, June 9, 2023.
Seungjun Cho | Bloomberg | Getty Images
OpenAI is allowing employees to sell nearly $1.5 billion worth of stock in a new SoftBank tender offer, CNBC has learned.
The new financing will allow the Japanese technology group to take a larger slice of the AI startup, and will allow current and former OpenAI employees to divest their shares, two people familiar with the matter told CNBC.
Employees will have until December 24 to decide whether they want to participate in the new tender offer, which has not been previously announced, one of the people said. The deal was pushed by SoftBank's billionaire founder and CEO Masayoshi Son, who insisted on seeking a larger stake in the startup after putting in $500 million in OpenAI's latest funding round, one of the people said.
The tender offer is not related to OpenAI's potential plans to restructure the company into a for-profit company, one of the people said.
OpenAI and SoftBank declined to comment.
The deal was executed through SoftBank's Vision 2 fund, and underscores Son's interest in the AI space and backing its most valuable private players. SoftBank was an early investor in Arm, and Son said at a recent conference that it was providing “tens of billions of dollars” to make the “next big step” in artificial intelligence. He has previously invested in Apple, Qualcomm, and Alibaba.
SoftBank Vision Fund 2 recently invested in AI startups Glean, Perplexity, and Poolside. SoftBank has about 470 portfolio companies and $160 billion in assets across its two Vision Funds.
The OpenAI investment fits with SoftBank's eagerness to spread cash, with a capital-intensive business model, a person close to Son told CNBC.
Even without SoftBank's deep pockets, OpenAI has had no problem raising billions in cash. Its value has risen to $157 billion in the past two years since ChatGPT was launched. OpenAI has raised nearly $13 billion in funding MicrosoftIt closed its latest $6.6 billion round in October, led by Thrive Capital and including participation from chipmaker Nvidia, SoftBank and others.
The company also obtained a $4 billion revolving line of credit, bringing its total liquidity to more than $10 billion. OpenAI expects losses of about $5 billion on revenue of $3.7 billion this year, CNBC confirmed in September with a person familiar with the situation.
OpenAI employees can cash out
The tender offer will be open to current and former employees who were granted restricted stock units at least two years ago and have held the shares for at least that long, one of the people said. The unit price of $210 will match the company's latest financing round.
Tender offers have become crucial for technology employees amid a dormant IPO market and soaring company valuations. Private companies rely on such deals to keep their employees happy and reduce pressure to list on public markets. Since OpenAI does not have any IPO on the immediate horizon and a price that makes the company too expensive for potential acquirers, secondary stock sales are the only way in the near future for shareholders to obtain a portion of their paper wealth.
Databricks is another private company raising money to allow employees to cash out and avoid the pressures of public markets, CNBC reported this week.
OpenAI has taken a more restrictive approach to tender offers in the past, with rules allowing the company to limit who can participate in stock sales, CNBC reported in June. Current and former OpenAI employees previously told CNBC that there is growing concern about access to liquidity following reports that the company has the ability to redeem vested shares.
But the company reversed its policies on secondary stock sales this summer, and now allows current and former employees to participate equally in annual tender offers.
The company expects to allow more of these secondary sales, and will need to tap private markets again in the future based on demand from investors and the capital-intensive nature of the business, a person familiar with the tender offer said this week.
OpenAI has faced increasing competition from startups like Anthropic and tech giants like Google. The generative AI market is expected to reach $1 trillion in revenue within a decade, and corporate spending on generative AI has risen by 500% this year, according to recent data from Menlo Ventures.
Last month, OpenAI launched a search feature within ChatGPT, its viral chatbot, which positions the high-powered AI startup to better compete with search engines like GoogleMicrosoft Bing and confusion.
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