OpenAI gets new $1.5 billion investment from SoftBank, allowing employees to sell shares in a tender offer
KEY POINTS
- OpenAI is allowing employees to sell about $1.5 billion worth of shares in a new tender offer to SoftBank, CNBC has learned.
- SoftBank’s latest investment adds to OpenAI’s recent $6.6 billion funding round at a $157 billion valuation.
- The deal was spurred by SoftBank billionaire founder and CEO Masayoshi Son, who was persistent in asking for a larger stake in the company, a person familiar with the matter said.
OpenAI is
allowing employees to sell about $1.5 billion worth of shares in a new tender
offer to SoftBank, CNBC has learned.
The new
financing will allow the Japanese tech conglomerate to get an even larger slice
of the AI startup and allow current and former OpenAI employees to cash out
their shares, two people familiar with the matter told CNBC.
Employees
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 people 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 putting $500
million into OpenAI’s last funding round, one of the people said.
The tender
offer is not related to OpenAI’s potential plans to restructure the firm to a
for-profit business, one of the people said.
OpenAI and
SoftBank declined to comment.
The deal,
which the people familiar with the matter said was carried out through
SoftBank’s Vision 2 fund, underscores Son’s interest in the AI space and in
backing the most valuable private players. SoftBank was an early investor in
semiconductor company Arm, and Son said at a conference in October that he’s
saving “tens of billions of dollars” to make the “next big move” in artificial
intelligence. He previously invested in Apple, Qualcomm and Alibaba.
SoftBank’s
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 matches SoftBank’s eagerness to deploy cash, with a
capital-intensive business model, a person close to Son told CNBC.
Even without
SoftBank’s deep pockets, OpenAI has had no trouble raising billions in cash.
Its valuation has climbed to $157 billion in the two years since it launched
ChatGPT. OpenAI has raised about $13 billion from Microsoft
, and it
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 received a $4 billion revolving line of credit, bringing its total
liquidity to more than $10 billion. OpenAI expects about $5 billion in losses
on $3.7 billion in revenue 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 had been 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 align with
the company’s most recent funding round.
Tender
offers have become crucial for tech employees amid a dormant IPO market and
skyrocketing company valuations. Private companies rely on such deals to keep
employees happy and reduce the pressure to list on public markets. Since OpenAI
has no initial public offering immediately on the horizon and a price tag that
makes the company prohibitively expensive for would-be acquirers, secondary
stock sales are the only way in the near future for shareholders to pocket a
portion of their paper wealth.
Databricks
is another private company raising money to allow employees to cash out and
avoid public markets pressure, CNBC reported Tuesday.
OpenAI took
a more restrictive approach to tender offers in the past, with rules allowing
the company to determine who gets to participate in stock sales, CNBC reported
in June. Current and former OpenAI employees previously told CNBC that there
was growing concern about access to liquidity after reports that the company
had the power to claw back vested equity.
But the
company reversed its policies toward secondary share sales in June, and it now
allows current and former employees to participate equally in annual tender
offers.
The company
expects to allow more of these secondary sales, and it will 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 person familiar with
the new tender offer.
OpenAI has
faced increasing competition from startups such as Anthropic and tech giants
such as Google. 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.
In October,
OpenAI launched a search feature within ChatGPT, its viral chatbot, that
positions the high-powered AI startup to better compete with search engines
such as Google
, Microsoft’s Bing and Perplexity.
Kindle Unlimited Unlimited Reading. Unlimited Listening. Any Device.
Comments
Post a Comment