In a significant development for employees and investors, OpenAI is offering a new tender opportunity for current and former employees to sell approximately $1.5 billion worth of shares to SoftBank, CNBC has reported, citing sources familiar with the matter.
This move enables employees to cash out their stakes while granting SoftBank a larger foothold in the AI startup.
This tender offer comes after SoftBank’s $500 million investment in OpenAI during its last funding round. It highlights the persistence of Masayoshi Son, SoftBank’s billionaire founder, in securing a larger slice of the AI market. Known for his investments in transformative technology, Son has signaled his commitment to artificial intelligence, recently stating he is reserving “tens of billions of dollars” for AI ventures.
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SoftBank’s interest in OpenAI complements its broader AI strategy, following investments in startups such as Glean, Perplexity, and Poolside through its Vision Fund 2. With assets exceeding $160 billion, SoftBank has made AI a cornerstone of its investment philosophy.
The tender offer is available to OpenAI employees who were granted restricted stock units (RSUs) at least two years ago and have held these shares since then. The unit price for the sale is set at $210, aligning with the company’s recent valuation of $157 billion, which has surged significantly since the launch of ChatGPT two years ago.
This is a marked shift from OpenAI’s previously restrictive policies on secondary share sales. Earlier, the company exercised considerable discretion over which employees could participate in stock sales, creating concerns about liquidity among stakeholders. However, following policy changes this summer, all eligible employees can now participate equally in tender offers.
Why Tender Offers Matter
The tender offer provides liquidity to employees at a time when the initial public offering (IPO) market remains sluggish. With no immediate IPO plans and a valuation that makes acquisition unlikely, OpenAI’s secondary stock sales are crucial for employees to access a portion of their equity wealth.
Similar trends have been observed with companies like Databricks, which recently raised funds to allow employees to cash out while sidestepping public market pressures.
Despite its meteoric rise, OpenAI remains a capital-intensive business. In 2024, the company is projected to incur $5 billion in losses against revenues of $3.7 billion, CNBC confirmed in September. To sustain operations, OpenAI has raised over $13 billion, including substantial contributions from Microsoft, Thrive Capital, Nvidia, and SoftBank. Additionally, it secured a $4 billion revolving credit facility, bringing its total liquidity to over $10 billion.
This funding strategy is essential as OpenAI faces fierce competition from startups like Anthropic and tech giants like Google. As business spending on generative AI surged 500% this year, the market is predicted to generate $1 trillion in revenue within the next decade.
To bolster its competitive edge, OpenAI recently launched a search feature within ChatGPT, positioning it as a challenger to search engines like Google and Microsoft Bing. The move reflects the company’s ambition to expand its offerings in the generative AI space.
SoftBank’s AI Gambit
For SoftBank, this tender offer aligns with its broader vision of capitalizing on AI-driven innovations. With previous successful investments in Arm, Apple, and Alibaba, SoftBank is poised to leverage OpenAI’s market position to fortify its AI portfolio.
What’s Next?
OpenAI’s shift toward accommodating employee liquidity, coupled with SoftBank’s aggressive investment strategy, underlines a significant development in the AI industry. The success of this tender offer will likely influence future funding rounds and solidify OpenAI’s standing in an increasingly competitive industry.
The generative AI market is predicted to top $1 trillion in revenue within a decade, and business spending on generative AI surged 500% this year, according to recent data from Menlo Ventures.
OpenAI has been expanding its services in a bid to grab a larger market share in the face of growing competition. Last month, the company launched its chatbot search service and is understood to have a plan to introduce a web browser.