OpenAI files confidential IPO bid as AI capital race intensifies

OpenAI has submitted a confidential draft registration statement to the U.S. Securities and Exchange Commission for an initial public offering, according to a blog post published on Monday. The filing arrives slightly more than a week after rival artificial intelligence firm Anthropic made a similar move, escalating the competitive pressure between the two leading companies as they seek public market listings. The confidential nature of the submission means OpenAI has not yet disclosed the number of shares to be offered, the offering price, or the total capital it intends to raise.

The move signals a pivotal moment for the company, which held a post-money valuation of $852 billion in its last reported funding round. However, the path to a public listing is complicated by significant financial headwinds. OpenAI recently missed internal targets for new users and revenue, and Chief Financial Officer Sarah Friar has reportedly expressed concern regarding the firm’s ability to sustain massive spending on data centres. The company is projected to face a burn rate of $85 billion in 2028, with positive cash flow not expected until 2030, even after doubling sales from the previous year.

This financial trajectory contrasts sharply with the narrative presented by rival Anthropic, which has described its financials as closer to achieving quarterly profitability. Despite this, Anthropic’s own burn rate remains substantial, supported by a recent $65 billion funding round and potential debt allocations. In the secondary markets, the disparity in investor sentiment is visible. Anthropic recently surged to a $1 trillion valuation on the Forge Global platform, surpassing OpenAI, which was recorded at approximately $880 billion in April. David Shapiro, founder and CEO of OpenVC, noted that Anthropic’s year-to-date appreciation of 123 per cent far exceeds OpenAI’s 11.3 per cent.

Despite the valuation gap, Shapiro indicated that OpenAI has not experienced a collapse in secondary market interest. He observed a slight increase in valuation over recent days, suggesting investors may be pricing both companies as potential winners in the broader large language model race. However, experts warn that whoever debuts first will likely secure a larger share of the increasingly scarce capital for AI firms, particularly as Elon Musk’s SpaceX is also poised for a debut at a $1.75 trillion valuation.

The IPO filing also arrives amidst ongoing legal and governance challenges for OpenAI. The company is navigating allegations from the state of Florida regarding harm to children, including accusations of providing information to school shooters and guiding users toward self-harm. Additionally, a lawsuit filed by co-founder Elon Musk alleging a breach of the company’s nonprofit promise was dismissed after a jury found the claim was barred by the statute of limitations. These legal battles, combined with internal governance struggles including the brief ousting of CEO Sam Altman in 2022, underscore the complex environment in which OpenAI is preparing for its public debut.