An OpenAI spokesperson recently shared with Reuters that the company is not currently prioritizing an Initial Public Offering (IPO), stating, “an IPO is not our focus, so we could not possibly have set a date.” Instead, the company is concentrating on building a sustainable business and furthering its mission to ensure that the advancements in Artificial General Intelligence (AGI) benefit everyone.
Revenue Grows as Losses Mount
The discussion around an IPO comes in the wake of a restructuring process that OpenAI completed on October 28. This restructuring has lessened the company’s dependency on Microsoft, which has invested a remarkable $13 billion and presently holds about 27 percent of OpenAI’s shares. As of late, OpenAI has been valued at approximately $500 billion in private equity markets.
Founded as a nonprofit in 2015, OpenAI transitioned to include a for-profit arm a few years later, still under nonprofit oversight. The organization is now governed by the newly formed OpenAI Foundation, which maintains control while holding a 26 percent stake in the for-profit entity, OpenAI Group. Additionally, the foundation has a warrant for more shares if certain performance benchmarks are met.
Should OpenAI successfully launch an IPO, it could yield significant returns for investors like Microsoft, SoftBank, Thrive Capital, and Abu Dhabi’s MGX. Nevertheless, the company is facing considerable financial hurdles. According to insiders familiar with its financial situation, OpenAI anticipates reaching about $20 billion in revenue by the end of the year. However, it is also experiencing substantial quarterly losses.
Microsoft’s financial reporting recently shed light on the scale of OpenAI’s losses. In a quarterly earnings release, Microsoft noted that its share of losses from OpenAI had reduced its net income by $3.1 billion for the quarter ending September 30. Since Microsoft owns 27 percent of OpenAI under its revised structure, the data implies that OpenAI may have incurred around $11.5 billion in losses during that same quarter. This figure is particularly striking as it surpasses half of OpenAI’s projected revenue for the entire fiscal year.
For more detailed insights and a deeper understanding of OpenAI’s financial landscape and the implications of a potential IPO, you can read further Here.
Image Credit: arstechnica.com
