Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
An upcoming sale of shares in OpenAI is set to test how much the past week’s leadership chaos has cost the company and its backers, though big investors are bullish about securing a high valuation.
The employee stock sale, which had been planned before the sacking last week of chief executive Sam Altman and expected to value the company at $86bn, will continue as planned, according to two investors with direct knowledge of the matter.
It will be the first test of investor appetite in OpenAI following a battle between Altman and the board that brought to light issues at the company, such as complex governance arrangements in which a not-for-profit board oversees a for-profit company.
Venture groups such as Josh Kushner’s Thrive Capital, Sequoia Capital and Khosla Ventures, were among those that pushed for Altman’s reinstatement, as they sought to protect their existing stakes in OpenAI.
Investors remain confident that a new share sale can still treble the $29bn valuation placed on OpenAI when Microsoft committed to invest $10bn in the company at the start of this year.
“Clearly this almost destroyed a lot of value in the short term, it’s hard to say what happens next,” said Vinod Khosla, an early investor in OpenAI. “Valuation is a function of investor perceptions. The company is the same or better off than it was last Thursday.”
But analysts have suggested that OpenAI will be hit by the week’s events, with rival groups such as Google and Amazon representing strong and stable challengers in the race to offer generative artificial intelligence services to businesses and consumers.
“It hurt their valuation — we all know that. It’s just a mess,” said Anat Alon-Beck, associate professor in corporate law and governance at Case Western Reserve University School of Law. “I don’t think their valuation is going to go up without them now taking the proper measures.”
The $86bn valuation was mooted last month when OpenAI was the most feted Silicon Valley’s start-up and the dominant force in an AI boom which was kicked off by the launch of the company’s chatbot ChatGPT a year ago.
The four directors who sacked Altman were OpenAI co-founder Ilya Sutskever, technology entrepreneur Tasha McCauley, Helen Toner from the Center for Security and Emerging Technology at Georgetown University, and Quora’s chief executive Adam D’Angelo.
Three directors lost their positions when Altman returned, but D’Angelo remained on the new board, overseeing the transition. That was “not good”, said Alon-Beck, referring to the failure to replace all of them.
The outgoing directors also secured other concessions that will hang over the company, including an independent investigation into the events of the past week, as well as assurances that Altman would not rejoin the board.
Still, Altman’s return as chief executive has provided some relief for investors and could pave the way for a simpler corporate structure with a clearer focus on driving returns, rather than the board’s purpose of creating AI that “benefits all of humanity”, according to two investors in the company.
Microsoft, which holds a significant minority stake in the company, is also hoping for governance changes that could give it a say in how the company is run.
Kushner, whose Thrive Capital had planned to lead the employee stock sale, said: “The resilience and strength we have seen from the entire OpenAI team in the past few days has been extraordinary, and we consider it a true honour to be their partners now and in the future.”