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

OpenAI completed a $7 billion tender offer to buy back employee shares at an $852 billion valuation, holding its worth flat as the ChatGPT maker prepares for a potential public listing.

"We have not had the best 12 months in our history, and that is mostly my fault, but we are about to have the best 12 months to date," Sam Altman, chief executive officer of OpenAI, said.

OpenAI funded the buyback itself rather than tapping outside investors, a departure from prior tenders. In October, Thrive Capital, SoftBank Group and others purchased $6.6 billion in employee shares at a $500 billion valuation, and a 2024 deal brought in $1.5 billion from SoftBank. The company raised $122 billion in March at the same $852 billion valuation, and it confidentially filed paperwork with the U.S. Securities and Exchange Commission in June for a potential initial public offering at the end of 2026.

The self-funded tender keeps OpenAI's cap table free of new outside holders before a listing and shows the company has enough cash on hand after its March raise. The move comes as OpenAI faces intensifying competition from Anthropic, which became profitable earlier this year and is also preparing for a public debut.

IPO Race With Anthropic Intensifies

Anthropic's April tender was tied to a $30 billion funding round at a $380 billion post-money valuation, with employees holding onto shares while investor demand went partly unfilled. At OpenAI's own earlier tenders, the opposite happened, with employees selling so heavily that billions in investor demand went unmet.

Altman told staff in June he expects OpenAI to go public within the next year, though other reports have pointed to a possible delay into 2027. Funding the tender itself lets OpenAI keep that timeline flexible rather than answering to a new set of investors. OpenAI has also been cutting prices for customers even as infrastructure costs climb, pressures that will matter to investors pricing either company's eventual public debut.

The tender offer has been in the works since OpenAI closed its record-breaking $122 billion funding round in March, according to CNBC. The deal helps alleviate near-term pressure for liquidity, allowing employees to cash in a portion of their holdings ahead of the company's potentially massive IPO. OpenAI declined to comment on the deal.

For investors, the self-funded buyback shows financial strength at a moment when OpenAI's spending on computing infrastructure and model training continues to climb. The company's ability to fund a $7 billion tender from its own balance sheet, rather than diluting existing holders, suggests it has built a substantial cash buffer since the March raise. That matters as OpenAI and Anthropic compete to capture enterprise AI spending, with both companies cutting prices to win customers.

The two rivals are also racing to list first. Anthropic, once viewed as the underdog, has gained momentum for its AI software and vaulted ahead of OpenAI in valuation, according to Bloomberg. A public debut for either company would rank among the largest technology listings in history, giving investors a direct way to bet on the AI buildout that has driven record capital spending across the sector.

This article is for informational purposes only and does not constitute investment advice.