OpenAI Aims for $500 Billion Valuation with New Secondary Stock Sale

OpenAI has begun talks about a potential secondary stock sale that could allow its staff to cash out their shares worth billions of dollars. According to Reuters, the private share sale could push OpenAI’s valuation to $500 billion, up from the current $300 billion valuation.

Rapid Revenue Growth

OpenAI’s employee stock sale highlights the company’s rapid revenue gain, user-base growth as well as intense competition among AI companies to attract talent. The stock sale is expected to take place before OpenAI’s potential IPO.

Over the last seven months, OpenAI has doubled its revenue to reach a yearly run rate of about $12 billion. The AI startup is expected to generate up to $20 billion by the end of 2025. OpenAI’s revenue growth has largely been driven by its flagship product, ChatGPT. Currently, ChatGPT has a weekly active user base of about 700 billion, up from 400 million users in February.

OpenAI isn’t the only unlisted company that has leveraged private share sales to reward long-term employees and boost valuation. Companies such as Ramp and Databricks have applied this strategy before to achieve similar objectives. Sources close to OpenAI say the share sale will be open to current and previous employees.

In recent months, major tech companies have been competing to attract AI talent through lucrative packages. Meta, for instance, invested $14.3 billion in Scale AI and poached the startup’s CEO Alexandr Wang to head its newly established Meta Superintelligence Lab.

Engaging Current Investors

According to sources close to the AI company, OpenAI is already discussing the upcoming share sale with existing investors like Thrive Capital. OpenAI is negotiating the share sale at a valuation nearly double its current $300 billion, which would surpass SpaceX’s estimated $400 billion valuation.

OpenAI’s secondary stock sale comes at a time when the ChatGPT maker is wrapping up a fundraising round led by Japan’s tech investor, SoftBank Group. OpenAI expects to raise $40 billion in this funding round based on its $300 billion valuation. SoftBank has to finance its portion of $22.5 billion in this funding round by the end of 2025.

Although OpenAI is yet to finalize the actual valuation of the secondary share sale, the volume of shares to be sold will depend on investor demand. However, sources familiar to the company suggest that the deal could surpass the $1.5 billion stock value that the startup sold in a private sale in 2024.

OpenAI’s share sale points to the unique investment environment that’s being driven by the AI boom where investors flood AI start-ups with the hope that the eventual market leader will hit the trillion dollar valuation.

OpenAI’s Restructuring Complexities

OpenAI has been working to acquire a public benefit corporation status, which it says will position it better for a future IPO. However, the ChatGPT maker cannot shift from its current non-profit status unless Microsoft, which has invested over $13 billion in OpenAI, sells its stake. OpenAI and Microsoft have been renegotiating their multibillion-dollar partnership for months now.

For OpenAI, converting to a for-profit entity is critical for the $40 billion funding round. 50% of this funding is pegged on OpenAI completing its restructuring process by the end of 2025. SoftBank has been aiming for Microsoft’s spot in OpenAI with increased investments. The company has entered into joint ventures with the ChatGPT maker, with the $500 billion Stargate project being most notable.

The AI startup first announced plans to convert its for-profit entity into a public benefit corporation in December 2024. The new structure is expected to balance shareholder interests with social goals as opposed to the non-profit status that focuses entirely on the public good.