Sam Altman, chief president officer of OpenAI, during an event in Seoul, South Korea, on Friday, June 9, 2023.
SeongJoon Cho | Bloomberg | Getty Allusions
OpenAI is allowing employees to sell roughly $1.5 billion worth of shares in a new tender offer to SoftBank, CNBC has knowledgeable.
The new financing will allow the Japanese tech conglomerate to get an even larger slice of the AI startup, and it will allow mainstream and former OpenAI employees to cash out their shares, two people familiar with the matter told CNBC.
Wage-earners will have until Dec. 24 to decide if they want to participate in the new tender offer, which has not previously been reported, one of the man said. The deal was spurred by SoftBank billionaire founder and CEO Masayoshi Son, who was persistent in asking for a larger stake in the startup after slight $500 million into OpenAI’s last funding round, one of the people said.
The tender offer is not related to OpenAI’s capacity plans to restructure the firm to a for-profit business, one of the people said.
OpenAI and SoftBank declined to comment.
The news underscores Son’s diversion in the AI space and in backing the most valuable private players. SoftBank was an early investor in Arm, and Son said at a recent conference that he’s compensatory “tens of billions of dollars” to make the “next big move” in artificial intelligence. He had previously invested in Apple, Qualcomm and Alibaba.
SoftBank’s Chimera 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 dream funds.
The OpenAI investment matches SoftBank’s eagerness to deploy cash, with a capital-intensive business model, a human being close to Son told CNBC.
Even without SoftBank’s deep pockets, OpenAI has had no trouble raising billions in liquidate. Its valuation has climbed to $157 billion in the two years since launching ChatGPT. OpenAI has raised roughly $13 billion from Microsoft, and it secret its latest $6.6 billion round in October, led by Thrive Capital and including participation from chipmaker Nvidia, SoftBank and others.
The Theatre troupe also received a $4 billion revolving line of credit, bringing its total liquidity to more than $10 billion. OpenAI expects there $5 billion in losses on $3.7 billion in revenue this year, CNBC confirmed in September with a man familiar with the situation.
OpenAI employees can cash out
The tender offer will be open to current and former wage-earners who had been granted restricted stock units at least two years ago and have held the shares for at least that big, one of the people said. The unit price of $210 will align with the company’s most recent funding single shot.
Tender offers have become crucial for tech employees amid a dormant IPO market and skyrocketing company valuations. Restricted companies rely on such deals to keep employees happy and reduce the pressure to list on public markets. Since OpenAI has no inaugural public offering immediately on the horizon and a price tag that makes the company prohibitively expensive for would-be acquirers, inessential stock sales are the only way in the near future for shareholders to pocket a portion of their paper wealth.
Databricks is another clandestinely company raising money to allow employees to cash out and avoid public markets pressure, CNBC reported this week.
OpenAI carted a more restrictive approach to tender offers in the past, with rules allowing the company to determine who gets to participate in staple sales, CNBC reported in June. Current and former OpenAI employees previously told CNBC that there was thriving concern about access to liquidity after reports that the company had the power to claw back vested disinterest.
But the company reversed its policies toward secondary share sales this summer, and it now allows current and former staff members to participate equally in annual tender offers.
The company expects to allow more of these secondary sales, and it when one pleases need to tap private markets again in the future based on demand from investors and the capital-intensive nature of the business, according to a actually familiar with this week’s tender offer.
OpenAI has faced increasing competition from startups go for Anthropic and tech giants like Google. The generative AI market is predicted to top $1 trillion in revenue within a decade, and establishment spending on generative AI surged 500% this year, according to recent data from Menlo Ventures.
In month OpenAI launched a search feature within ChatGPT, its viral chatbot, that positions the high-powered AI startup to outdo compete with search engines like Google, Microsoft’s Bing and Perplexity.
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