OpenAI mints hundreds of overnight millionaires as staff cash out $6.6bn in share sale

Roughly 600 staff at OpenAI have walked away with an average of $11 million (£8 million) apiece after cashing out a combined $6.6 billion (£4.8 billion) in shares, in one of the largest single transfers of employee wealth that Silicon Valley has produced.

The secondary share sale, first reported by the Wall Street Journal, allowed early employees of the ChatGPT developer to sell stock to incoming investors rather than wait for an initial public offering. As many as 75 of the lucky group sold the maximum permitted by the company and walked away with $30 million each.

It is a vivid illustration of the concentration of wealth being generated by the artificial intelligence boom and a sharp reminder, for British SME founders watching from the sidelines, of the scale at which the US technology sector now operates. The single payout pool exceeds the entire annual research and development budget of most FTSE 250 companies.

OpenAI requires staff to hold their shares for two years before they can be sold, meaning last year’s deal was the first significant opportunity for early employees to realise their gains since ChatGPT was released to the public in November 2022. The product’s instant global success has driven one of the steepest re-ratings of a private company in corporate history.

The lab founded by Sam Altman and his co-founders was valued at around $1 billion in 2019, when it established a profit-making subsidiary alongside its non-profit parent. By 2023, after Microsoft’s landmark investment shortly following ChatGPT’s launch, the figure had reached $29 billion. The October secondary sale that delivered last year’s payouts valued the company at $500 billion, and a further $122 billion fundraising round completed in March pushed the figure to $852 billion.

An initial public offering, expected in early 2027, could value OpenAI at more than $1 trillion and turn dozens of its earliest employees into multimillionaires several times over. Elon Musk’s SpaceX, which now houses his xAI laboratory, and Anthropic, the developer of the Claude chatbot, are both reported to be eyeing public market debuts at comparable valuations.

The scale of the OpenAI payout has not gone unnoticed in the wider technology labour market. Meta, the owner of Facebook and Instagram, is reported to have offered individual compensation packages worth more than $300 million in an attempt to lure leading AI researchers from rivals. The resulting talent war has pushed salaries for senior machine-learning engineers well into seven figures and is making it increasingly difficult for European start-ups, including British ones, to retain home-grown talent.

The transaction was completed even as concerns about an AI bubble reached a recent peak. Technology stocks suffered a sharp sell-off between September and October last year amid investor unease over the circular financing arrangements between AI laboratories, chipmakers and cloud providers, and over the eye-watering capital expenditure being committed by the largest players. That OpenAI was able to clear a $6.6 billion secondary at a $500 billion valuation in the middle of that wobble underlines the strength of demand from sovereign wealth funds and private investors for exposure to the sector.

The payouts also coincide with an increasingly bitter legal dispute between the company and Mr Musk, an early backer who has sued OpenAI over its conversion from a charitable foundation into a for-profit enterprise. The case, which has been in court for the past fortnight, has produced one of the more eye-popping disclosures of the boom: Greg Brockman, OpenAI’s president, testified that his stake in the business is worth approximately $30 billion. OpenAI has dismissed the litigation as motivated by jealousy and did not respond to a request for comment on the share sale.

For founders of British growth-stage businesses, the OpenAI numbers serve as both inspiration and warning. They demonstrate the extraordinary value that secondary markets can unlock for employees without the need to list, a route increasingly favoured in Silicon Valley as companies stay private for longer. They also underline the talent and capital headwinds facing any UK firm hoping to compete with the American hyperscalers, where stock-based compensation alone can exceed the lifetime earnings of an entire British R&D team.

Whether the AI boom proves to be a generational technological shift or a richly priced rerun of the dotcom era, the cheques have already cleared.

Read more:
OpenAI mints hundreds of overnight millionaires as staff cash out $6.6bn in share sale