OpenAI has reversed its policy on secondary stock sales and will now allow current and former employees to participate equally in its annual tender offer, CNBC has learned.
The artificial intelligence startup has adopted restrictive measures in the past that allow the company to decide who can participate in stock sales, CNBC reported earlier this month. This has left many shareholders concerned about their ability to obtain liquidity for the multi-million dollar portion of their stakes.
In a document shared via OpenAI equity management software last week, the company changed its policy and said “all sellers (current and former service providers) will have the same sales limits.” Document seen by OpenAI on CNBC Service providers include employees and consultants, Zhong said.
A spokesperson for OpenAI did not immediately respond to a request for comment.
Tender offers have become a particularly sensitive topic recently, as OpenAI’s valuation soared following the launch of ChatGPT in late 2022 and the IPO market has been relatively dormant for more than two years. Since the company won’t have a public offering and the company is too expensive for potential acquirers, secondary stock sales are the only way for shareholders to pocket some of their paper wealth in the near future.
Current and former OpenAI employees have previously told CNBC that there are growing concerns about access to liquidity following reports that the company has the right to reclaim vested equity. OpenAI receives around $13 billion in backing Microsoftalready valuable More than $80 billion.
Earlier filings indicate that for former employees, secondary sales often occur months after current employees’ transactions. And sales limits can vary significantly. The limit is $2 million for former employees and $10 million for current employees in at least two tender offers.
Changes announced last week include eliminating a provision that some feared could allow the company to forcefully repurchase stock at its “sole and absolute discretion” at “fair market value.” “The Company may, at any time and in its sole discretion, redeem (or sell) any transferee’s interest in the Company for cash equal to the fair market value of such interest,” the previous filing said.
OpenAI said in the updated filing that it “will not enforce any provisions in employee equity documents that mandate the redemption of equity shares at fair market value and will amend our documents to reflect the same.”
Former employees who now work for competitors will also no longer be excluded from formal takeover offers and will be placed in the same category as other former employees, the internal document said.
OpenAI said one area where employees are still queuing up is whether future tender offers are oversubscribed, meaning interested parties want to sell more shares than investors have agreed to buy. OpenAI said that in this case, “we will prioritize providing liquidity to current service providers over previous service providers,” resulting in possible “layoffs” for those who are no longer with the company.
OpenAI changed its tender offer policy, taking further steps to ease employee concerns. Following reports of potential kickbacks, OpenAI recently released 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.
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.
However, the latest changes do not address one notable issue regarding employee equity. In the past, OpenAI has opened “giving rounds” to current employees, allowing them to donate a certain amount of their vested equity to charity, resulting in tax benefits. According to information seen by CNBC earlier this month, former employees may be excluded, as the donation rounds may be “only offered to current employees and there is no guarantee that will occur.” The new document does not detail whether the policy remains in effect.
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