OpenAI buys back $7 billion in employee shares ahead of potential IPO

OpenAI has bought back about $7 billion worth of shares from current and former employees, giving its workforce a chance to cash out ahead of a potential stock market listing, according to media reports.

Bloomberg reported that the deal values the ChatGPT maker at $852 billion, matching its valuation from the company's latest funding round in March.

Employee share buyback

OpenAI bought the shares directly rather than relying on outside investors for the tender offer, according to people familiar with the deal.

The move gives employees liquidity while allowing OpenAI to remain privately held.

Private technology companies increasingly use such share sales to let employees realise the value of their equity without going public.

OpenAI has previously worked with investors including Thrive Capital and SoftBank to help employees sell shares.

IPO plans remain uncertain

The buyback comes as OpenAI prepares for a possible initial public offering.

The company confidentially filed paperwork with the US Securities and Exchange Commission in June. However, the latest tender offer could suggest that an IPO is not imminent.

OpenAI raised $122 billion in March from technology companies and venture capital firms. The funding round valued the company at $852 billion.

The company has also been working to sharpen its business strategy, with a greater focus on enterprise customers.

OpenAI faces pressure to deliver

OpenAI's potential listing comes as competition in the AI industry intensifies.

Anthropic has gained ground on OpenAI in recent months and has reportedly moved ahead in valuation. The rival AI company could also reach public markets before OpenAI.

OpenAI CEO Sam Altman acknowledged the company's recent challenges last month, writing, “We did not have our best 12 months ever, which is mostly my fault, but we are about to have our best 12 months to date.”

The company has also faced pressure after reportedly missing some internal revenue and user targets.

The latest share buyback could therefore give employees liquidity while giving OpenAI more time to strengthen its business and financial position before pursuing a public listing.