OpenAI walks back controversial stock sale policies, will treat current and former employees the same

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.