OpenAI internal stock sale raises concerns among former employees | Wilnesh News

OpenAI plans to allow stakeholders to sell a portion of their shares each year, but the company has been valuable Valued at more than $80 billion, restrictive measures are being taken, causing concern among current and former employees CNBC has learned about the startup’s power to decide who participates.

As OpenAI’s valuation soared after launching ChatGPT in late 2022, many early employees are sitting on millions of dollars worth of equity. With no IPO in the near future and the company being too expensive to acquire, the only way for shareholders to realize the value of their equity in the short term is through secondary stock sales.

However, current and former OpenAI employees are increasingly concerned about access to liquidity, according to interviews and documents shared internally. Those concerns have been heightened in recent weeks by reports that the company has the right to claw back vested stakes, people familiar with the matter said.

To allay some of these concerns, OpenAI recently distributed a document obtained by CNBC titled “Overview and Review of OpenAI’s Tender Process,” detailing how the company has made equity acquisitions in the past and how it plans to handle those acquisitions in the future. The issue has become a major talking point at OpenAI and among recent departures, according to internal documents, Slack messages and exit agreements seen by CNBC, as well as conversations with multiple former OpenAI employees.

OpenAI has told employees it will try to make a tender offer about once a year, but it depends on how the company and the market are doing at the time, a person familiar with the matter said.

It’s the latest controversy for OpenAI, which has been at the center of the tech landscape for much of the past 18 months and recently announced a partnership with apple Integrate ChatGPT and Siri on Monday. Received approximately $13 billion in support MicrosoftOpenAI has an atypical “profit cap” model, using a non-profit organization as the management entity of the for-profit subsidiary.

Less than seven months ago, co-founder Sam Altman was abruptly ousted as CEO amid a clash with the board, and days later amid an outcry from investors and loyal employees Resume duty.

Meanwhile, a person familiar with the matter confirmed to CNBC last week that the U.S. Federal Trade Commission and the Department of Justice are about to launch antitrust investigations into Microsoft, OpenAI, and Nvidia to examine their impact on the artificial intelligence industry. Last month, OpenAI disbanded a team focused on the long-term risks of artificial intelligence a year after its founding. Shortly after OpenAI co-founders Ilya Sutskever and Jan Leike announced their departure, Leike wrote in an article on X that OpenAI’s “safety culture and processes have given way to shiny products.”

As OpenAI grew, the company used aggressive tactics to get employees to sign exit agreements that affected the future of their shares.

“If you own any vested units and you do not sign the exit documents, including a general release letter, as required by company policy, it is important to understand that, among other things, you will not be eligible to participate in future tender exercises or our participation as a private Other liquidity opportunities that the company may sponsor or facilitate,” OpenAI wrote in the agreement, which was seen by CNBC.

The departing employee’s filing states that in order to participate in bidding activities and liquidity opportunities, the individual must comply with “all applicable company policies as determined by OpenAI.”

Last month, OpenAI announced it was reversing a controversial decision to give former employees a choice between signing non-disparagement agreements that never expired or retaining vested equity in the company. An internal memo seen by CNBC was sent to former employees and shared with current employees.

The memo to each former employee says that when that person left OpenAI, “you may have been informed that you were required to sign a general release agreement containing a non-disparagement clause in order to retain the vested interest” in the unit. “

“We are very sorry that we are changing this language only now,” an OpenAI spokesperson told CNBC after the company changed course. “It does not reflect our values ​​or the company we want to be.”

“Historically, all eligible current and former employees have received liquidity opportunities at the same price, regardless of where they worked or when they left their job,” an OpenAI spokesperson said in an email to CNBC on Monday evening. A spokesman said the company did not expect that to change.

A former employee shared his OpenAI letter with CNBC, asking the company for further confirmation that his and others’ stakes were safe.

“I believe there are more issues that need to be addressed before I and other OpenAl employees can feel comfortable avoiding retaliation for our vested stakes,” the former employee wrote in an email to the company in late May. . He added, “Are there any circumstances in which a company would exclude current or former employees from a bidding exercise? If so, what are these circumstances? “

The person also asked whether the company would “under any circumstances force former employees to sell their units at fair market value” and what those circumstances would be. He asked OpenAI when his issue would be resolved and said he had yet to receive a response. OpenAI told CNBC it was responding to individual inquiries.

According to internal information seen by CNBC, another employee who resigned last week wrote in OpenAI’s “Core” Slack channel, “When news broke about the vested equity clawback clause in our resignation documents 2.5 weeks ago, I was shocked and outraged. The details that were later released “only reinforced that feeling,” the person wrote. “After fully hearing the leadership’s response, my trust in them has been completely broken. “

The person then tagged CEO Sam Altman in the message, highlighting what he said were flaws in Altman’s stated efforts to responsibly build artificial general intelligence (AGI). paradox.

“You often talk about our responsibility to safely develop general artificial intelligence and distribute its benefits broadly,” he wrote. This person added, “How can you expect to be trusted with that responsibility when you fail in your more basic task” of not threatening to “screw the departing employee?”

The company has also opened up “giving rounds” to current employees in the past, allowing them to donate a certain amount of a vested equity stake to charity, resulting in tax benefits. According to information seen by CNBC, former employees may be excluded because the donation rounds may be “only offered to current employees and there is no guarantee that will occur.”

After OpenAI, much of the discussion around future stock issues may now include a new voice On Monday it announced the hiring of Sarah Friar, a former Nextdoor CEO and Square CFO, as chief financial officer.

In April, the Federal Trade Commission voted to ban for-profit companies from entering into non-compete agreements. The final rule will take effect in September. The ban not only protects people from being punished for accepting another role, but also covers any agreement “Punish workers” or “prevent” workers from working for a competitor.

One attorney, who asked not to be identified because of client conflicts in the field, said OpenAI’s conduct toward the former employees left “legitimate arguments” for future litigation related to noncompetition issues. Another lawyer, who also requested anonymity, called it “undue pressure.”

“It sounds like they’re taking a hard line, but they’re by no means the only firm doing that when it comes to reselling private securities,” Doug Brayley, a partner at Ropes & Gray, said in an interview. “Private companies typically have a lot of questions about how they handle equity buybacks. It leaves you a lot of discretion.”

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