A recently completed stock deal saw OpenAI’s valuation surge to $500 billion and become the world’s most valuable private company, according to a report.
Current and former OpenAI employees sold about $6.6 billion in shares to a consortium of investors that included Thrive Capital, SoftBank, Dragoneer Investment Group, Abu Dhabi’s MGX and T. Rowe Price, according to Reuters, citing a source familiar with the matter.
The deal valued the ChatGPT-maker at $500 billion – well above the previous valuation of $300 billion, which was the prevailing level for a $40 billion capital raise that was led by SoftBank earlier this year.
That valuation pushes OpenAI past Elon Musk’s SpaceX, which had a $400 billion valuation during an insider share sale this summer, according to a Bloomberg report, citing people familiar with the transaction.
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The arrangement allowed for up to $10 billion in shares to be sold to the consortium, which suggests that some OpenAI shareholders may have been willing to forego the opportunity to sell the stock at the current time given the outlook for the company’s future amid the artificial intelligence (AI) boom.
Last month, OpenAI and Microsoft, an investor in the startup, announced a non-binding agreement that would allow for the ChatGPT-maker to be restructured into a for-profit company. Details related to the new arrangement between Microsoft and OpenAI weren’t disclosed.
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Microsoft invested $1 billion in OpenAI in 2019 and another $10 billion in early 2023. Those investments included terms that gave Microsoft exclusive access to sell OpenAI’s software on its Azure cloud computing provider and had preferred access to the startup’s technology.
The tech giant was previously OpenAI’s sole compute provider, though those terms were adjusted earlier this year to allow OpenAI to pursue its Stargate data center project, with $300 billion in long-term contracts with Oracle and a cloud deal with Google.
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OpenAI’s plan to restructure would allow it to eventually pursue an initial public offering and go public to raise more capital to fund its AI development efforts.
The company’s revenue has surged into the billions of dollars annually amid a surge in demand for AI tools, although it is yet to turn a profit as it pours funding into AI research and infrastructure investments.
OpenAI has been governed by a non-profit arm since its inception, and the company’s pivot to a capped for-profit structure prompted pushback from Musk, a co-founder of OpenAI who left the company in 2018 amid a disagreement with CEO Sam Altman over the company’s direction.
The company’s transition to a new corporate structure is subject to regulatory approval in California and Delaware and OpenAI hopes to complete the conversion by the end of this year.
Reuters contributed to this report.
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