OpenAI filed confidential documents for an IPO, the company announced Monday, kicking off what could be a months-long process toward a debut on a U.S. exchange. The move makes it the third company to file an application for what could be a trillion dollar IPO this year.
Tech companies are seeking the most powerful AI models, including publicly traded giants Alphabet, Amazon, Metaand Microsoft are hungry for tens of billions of dollars each to build more data centers and recruit scientists to develop their services.
An IPO would be another fundraising opportunity for OpenAI after the company raised $122 billion privately in March. The IPO, which brings many workers closer to a life-changing payday and increases transparency about a company’s financial health, could also boost employee morale and customer confidence as OpenAI attempts to regain its position as the undisputed leader in cutting-edge AI.
OpenAI did not specify the timetable for the IPO or the amount it plans to raise. “We recently submitted a confidential S-1,” the company said said in an unsigned one-paragraph blog post. “We expect there will be a leak, which is why we’re just announcing it. We haven’t decided on the timeline yet; it may take a while because there are things we want to do that are probably easier as a private company. But it’s a complex set of tradeoffs and it gives us the opportunity to go public sooner if that turns out to be best.”
OpenAI declined to comment further. But by preparing the documents, the company could draft a potentially successful first draft of Anthropic. If the rival encounters difficulties, OpenAI could wait and recalibrate.
A three-way race
Anthropic, founded in 2021 by former OpenAI employees, filed its confidential IPO documents on June 1. Just days before the filing, Anthropic’s latest fundraising raised its valuation to $965 billion, surpassing OpenAI’s $852 billion mark, both record numbers in the world of tech venture capital. Elon Musk’s SpaceX, which makes rockets, sells satellite internet and also develops some of the world’s most successful AI models, publicly filed its IPO documents last month.
The IPOs could value each of these companies at more than $1 trillion, although they are all unprofitable and have sales about 80 to 90 percent lower than almost all existing public companies worth billions of dollars. The only IPO to cross the $1 trillion mark was that of oil company Saudi Aramco in 2019.
OpenAI’s revenue from subscriptions, advertisements and service fees grew between $10 billion and $20 billion last year, according to the company’s previous disclosures. But it spent far more money on cloud computing and thousands of employees, resulting in billions of dollars in losses. In recent months, the company has carried out several restructurings due to executive illnesses and a try to focus on fewer projects.
OpenAI executives have been debating for months whether the company is ready to go public, according to two people familiar with the matter but not authorized to discuss confidential information. At one point last year, OpenAI was targeting an IPO in late 2027 or early 2028, according to another person familiar with the discussions.
Last week, President Donald Trump said his administration would explore the possibility of the U.S. government taking a stake in AI companies as they go public. OpenAI has been discussing the idea for months as a way to expand the public benefits of AI development, according to one of the people familiar with the company’s discussions. An OpenAI blog post co-authored Monday by CEO Sam Altman said “a good future of AI” requires that “many people, companies, communities, and countries can build, benefit from, and hold power.”
Legal challenges
In 2019, OpenAI created a for-profit subsidiary to allow it to raise money far more than it thought people would be willing to give. Today, the nonprofit owns about 25 percent, or more than $200 billion, of the company. He also has the power to block major business decisions and fire company executives. Canceling the nonprofit is a legal challenge.
Recently, OpenAI overcame a major obstacle on the path to its IPO by winning a lawsuit filed by Musk, who accused the ChatGPT creator of straying from its nonprofit mission. Musk’s claims were fired last month, after a federal judge and jury ruled he filed the lawsuit too late.
But OpenAI’s structure still faces scrutiny from state regulators in California and Delaware. This month, the California Attorney General’s Office denied WIRED’s formal request for records of recent communications with OpenAI, citing laws protecting investigations and certain other files from public disclosure.
OpenAI will need the U.S. Securities and Exchange Commission to approve the company’s accounting and disclosure of potential risks, which is the confidential process that begins now. The corporate structure could add unusual complexity to the review.
Last month, Chris Lehane, OpenAI’s head of global affairs, said to WIRED that the company will maintain its structure post-IPO because, as a public benefit corporation overseen by a nonprofit, it can consider the societal impacts of its efforts without having to prioritize shareholder value above all else.
So far, public advocacy groups have criticized OpenAI’s work. They accuse ChatGPT and other similar chatbots of being responsible for an epidemic of so-called AI psychosis this led to suicides and other fatal incidents, while labor experts worry about the risk of catastrophic job loss when AI systems take over manual tasks. How OpenAI addresses these AI harms in its refined documents, which would be made public closer to the IPO date, will likely attract a lot of attention.
In San Francisco, where OpenAI and Anthropic are respectively headquartered, residents are already bracing for huge increases in real estate prices. The IPO processes are expected to open up the possibility for employees to sell shares, thereby transforming dozens, if not hundreds, of paper millionaires and billionaires into real ones.
At least several early OpenAI employees, including the president Greg Brockman and former chief scientist Ilya Sutskeverhave become multi-billionaires thanks to the value of the shares they hold in the company, according to their testimony in Musk vs. Altman trial.