Skip to main content

OpenAI Spends $7B to Buy Back Employee Shares, IPO Still Far Off

OpenAI has just pulled off a massive $7 billion employee stock buyback, giving its staff a much-needed chance to cash out some of their shares. This tender offer, according to people familiar with the matter, was done entirely in-house—no external investors like Thrive Capital or SoftBank were invited to join this time. That's a notable shift from previous rounds where such investors participated in employee stock purchases.

The buyback values OpenAI at $85.2 billion, the same as its last funding round in March. So, no new valuation surge here—just a straightforward liquidity event for employees.

This move comes at a pivotal moment as OpenAI gears up for a potential IPO. Back in June, the company confidentially filed paperwork with the SEC, hinting that a public offering could happen later this year. But this large-scale buyback suggests otherwise. In an era where tech companies are staying private longer, tender offers like this have become a practical way for employees to monetize their stock without the hassle of going public.

Under Pressure: Performance and Competition

OpenAI's decision to buy back shares isn't happening in a vacuum. The company is grappling with both performance issues and competitive pressures. In April, the Wall Street Journal reported that OpenAI missed internal revenue and user targets. Then in July, CEO Sam Altman took to social media to admit, "the past 12 months were not our best period," blaming his own leadership for the shortcomings.

An IPO typically requires a company to show strong financials to investors, and OpenAI clearly isn't there yet. Meanwhile, rival Anthropic is reportedly profitable as of earlier this year, and its own IPO plans are adding to the urgency. Analysts think OpenAI's much-anticipated IPO might have to wait until its new strategy—cutting costs and focusing on enterprise services—starts showing results.

This $7 billion buyback serves a dual purpose: it's a retention tool for key talent, and it sends a signal that OpenAI would rather solidify its position in the private market than rush into an IPO with lackluster numbers.

Key Points

  • OpenAI completed a $7 billion employee stock buyback, excluding external investors.
  • The transaction values OpenAI at $85.2 billion, unchanged from its March funding round.
  • The buyback suggests an IPO is not imminent, despite confidential SEC filing in June.
  • OpenAI faces performance challenges and competition from Anthropic, which is reportedly profitable.
  • The move is seen as a way to retain talent and strengthen the company before going public.