OpenAI, the company that kicked off the artificial intelligence boom with the release of ChatGPT in 2022, has officially begun preparations to go public. The company, led by Sam Altman, has filed documents with the U.S. Securities and Exchange Commission, paving the way for one of the most anticipated stock market debuts in recent years. It could enter the market as early as this fall, and according to Reuters, possibly as early as September. However, the company itself acknowledges that it does not need to rush.
“We recently submitted a confidential Form S-1. We expect the information to leak, so we are announcing it directly,” the company wrote on its website. “We have not yet decided on the timing. It may take a while because there are things we want to do that are probably easier as a private company.” Form S-1 is a prospectus for investors that companies submit to the U.S. Securities and Exchange Commission before going public. A confidential filing means that officials have time to review the company’s financial statements before the public and investors see them. So far, we do not know how many shares OpenAI wants to sell or at what price.
But we do have some idea. The company reached a valuation of roughly $850 billion in a March funding round, and according to Reuters, it is targeting a valuation of up to $1 trillion for its IPO. That would make it one of the most valuable offerings in stock market history.
The Race Between Three AI Companies
OpenAI is not the only company preparing to head to Wall Street. Its biggest rival, Anthropic, the creator of the popular Claude assistant, submitted its own confidential filing on June 1, just a few weeks after raising $65 billion at a valuation of nearly $1 trillion. In doing so, Anthropic surpassed OpenAI’s value on the private market for the first time in history.
And third is Elon Musk’s SpaceX, which also encompasses his company xAI following their merger earlier this year. It launched the largest offering in history when it offered $75 billion worth of shares this week at a valuation of $1.75 trillion. The move will reportedly make Musk the world’s first trillionaire.
Why the rush? Bankers have indicated to both artificial intelligence companies that whoever goes public first will set the terms for the entire industry and capture the largest share of the capital waiting there for new AI companies. According to The Wall Street Journal, OpenAI’s management privately admitted concerns that Anthropic would beat it to the market.
OpenAI Statistics
ChatGPT is now used by more than 900 million people each week, and the company has over 50 million paying subscribers. In March, OpenAI said it was generating $2 billion in monthly revenue and growing roughly four times faster than the companies that defined the internet and mobile eras, including Alphabet and Meta.
But its success also has a dark side. According to The Wall Street Journal, the company recently missed some internal targets for revenue and new user growth, while Anthropic is crushing it among enterprise customers. OpenAI has also told investors that it does not expect to become profitable before 2030. For now, it is burning through money on a massive scale, primarily on chips and the construction of data centers.
The company is therefore looking for new sources of revenue. It launched a cheaper ChatGPT subscription for $8, introduced ads, and expects the lower-cost plan to increase its subscriber count to 122 million this year. Advertising is expected to become its largest source of revenue by 2030. Conversely, the company has shut down some peripheral projects, closing the Sora video-generation app this April, despite previously establishing a partnership with Disney for it.
Victory in Court Against Musk
Elon Musk’s lawsuit had long stood in the way of the IPO. Musk co-founded OpenAI and accused Altman and other executives of turning a nonprofit organization into a vehicle for private enrichment. OpenAI was founded in 2015 as a nonprofit research laboratory and only later created a for-profit arm to cover the rising costs of artificial intelligence development.
However, a jury ruled against Musk in May. The nine jurors found that the case fell outside the statute of limitations and that the company bore no liability. Analysts described the verdict as removing the main legal obstacle to the offering. Musk’s lawyer nevertheless announced that he would appeal.
OpenAI will not be completely in the clear, however. It faces more than a dozen lawsuits alleging that ChatGPT worsened users’ mental health crises, allegedly acted as a “suicide coach,” and may also have played a role in shootings in Canada and Florida.
Who Will Profit From the Debut
The IPO means a huge payday for early investors. OpenAI has raised more than $180 billion since its founding, with backers including SoftBank, Amazon, Nvidia, and above all Microsoft, which has invested $13 billion in the company since 2019. OpenAI renegotiated the terms of its partnership with Microsoft this year, giving it greater freedom to work with Amazon and Google.
The company is working on the offering with Goldman Sachs and Morgan Stanley, the same two banks leading the SpaceX offering. Before going public, OpenAI is also preparing to buy back shares from employees at its latest valuation of $852 billion, according to CNBC, to relieve pressure on them to cash out their stakes quickly. Nevertheless, some bankers warn that three massive offerings could drain capital that would otherwise flow to smaller companies. “OpenAI certainly does not want capital in the public markets to be exhausted,” Gil Luria of D.A. Davidson told Reuters.
