OpenAI changes secondary stock sale rules, treats ex-staffers equally

OpenAI has reversed its policies toward secondary share sales, and will now allow current and former employees to participate equally in annual tender offers, CNBC has learned.

The artificial intelligence startup has taken a restrictive approach in the past, with rules allowing the company to determine who gets to participate in stock sales, CNBC reported earlier this month. That led to concern among many shareholders about their ability to get liquidity for some of the millions of dollars worth of equity they own.

In a document shared last week through OpenAI’s equity administration software, the company altered its policy, saying “all sellers (current and former service providers) will have the same sales limit.” Service providers include employees and advisors, OpenAI said in the document, which was viewed by CNBC.

An OpenAI spokesperson didn’t immediately respond to a request for comment.

Tender offers have become a particularly sensitive subject of late due to OpenAI’s skyrocketing valuation, which followed the launch of ChatGPT in late 2022, and a relatively dormant IPO market for well over two years. With no initial public offering on the horizon and a price tag that makes the company prohibitively expensive for would-be acquirers, secondary stock sales are the only way in the near future for shareholders to pocket a portion of their paper wealth.

Current and former OpenAI employees previously told CNBC that there was growing concern about access to liquidity after reports that the company had the power to claw back vested equity. OpenAI, backed by roughly $13 billion from Microsoft, has been valued at over $80 billion.

Earlier documents indicated that, for former employees, secondary sales typically took place months after transactions for current staffers. And sales limits could differ significantly. In at least two tender offers, the limit for former employees was $2 million, compared to $10 million for current employees.

The change announced last week included the walking back of a provision that some worried could allow the company to forcibly repurchase shares at its “sole and absolute discretion” for the “fair market value.” Previous documents said “the Company may, at any time and in its sole and absolute discretion, redeem (or cause the sale of) the Company interest of any Assignee for cash equal to the Fair Market Value of such interest.”

OpenAI said in the updated document that it “will not enforce any provision in employee equity documents that forces equity redemption at fair market value, and will revise our documents to reflect the same.”

Former employees who now work at competitors will also no longer be excluded from official tender offers, and will be included in the same category as other former employees, the internal document said.

The one area where current employees will still be higher in line, OpenAI said, is if a future tender offer is oversubscribed, meaning that stakeholders want to sell more shares than investors have agreed to purchase. In that case, “we will prioritize giving liquidity to current service providers over former service providers,” resulting in a potential “cutback” for those no longer at the company, OpenAI said.

In reversing its tender-offer policies, OpenAI has taken a further step to assuage employee fears. Following reports of potential clawbacks, OpenAI recently circulated a document, obtained by CNBC, titled, “Overview and Recap of OpenAI’s Tender Process,” detailing how the company has conducted equity purchases in the past and how it plans to handle them in the future.

Last month, OpenAI announced it would backtrack on a controversial decision to make former employees choose between signing a non-disparagement agreement that would never expire and keeping their vested equity in the company.

However, one notable issue regarding employee equity was not addressed in the latest change. In the past, OpenAI has opened up “donation rounds” to current employees, allowing them to donate a certain amount of their vested equity to charity, which brings with it tax incentives. Former employees could be excluded, as the donation rounds would likely be offered “to active employees only and are not guaranteed to happen,” according to messages viewed by CNBC earlier this month. The new document did not detail whether the policy is still in place.