Key Points
OpenAI's IPO is confidential for now, so we don't know what kind of valuation the company is seeking.
In the most recent fundraising round, investors valued the maker of ChatGPT at $852 billion.
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The year of big IPOs just keeps getting bigger. OpenAI, the company behind ChatGPT, announced that it has taken the first steps toward an initial public offering, following in the footsteps of fellow AI company Anthropic, which took a similar step last week, and SpaceX, which is going public on June 12.
OpenAI’s most recent valuation from private investors was $852 billion, following a March fundraising round that brought in $122 billion. It’s likely that OpenAI will achieve a $1 trillion valuation when it goes public, joining a select few companies with that lofty market cap.
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Here’s what we know about the OpenAI IPO, and what investors can expect next.
Details are scarce for now
On June 8, OpenAI said it recently submitted a confidential Form S-1 to the U.S. Securities and Exchange Commission (SEC) for a proposed IPO of its common stock. The filing is the first step toward taking the company public, but because it’s confidential, OpenAI will be allowed to keep financial results and other sensitive information private until the SEC completes its review of the submission. That allows OpenAI to discuss the filing privately with regulators before it goes public, and make changes as needed before the shares are listed for public trading.
Image source: Getty Images.
It also allows OpenAI to back out of the deal if it chooses, although that is highly unlikely.
But for now, we don’t know exactly when OpenAI plans to go public or what the proposed price range for its shares would be.
Here is the company’s statement, in its entirety:
We recently submitted a confidential S-1. We expect it to leak so we’re just announcing it. We have not decided on timing yet; it may be a while because there are things we want to do that are likely easier as a private company. But it’s a complicated set of tradeoffs and this gives us the option to go public sooner if that ends up being best.
The listing has been highly anticipated. OpenAI has been one of the most visible private companies since launching its ChatGPT large language model in November 2022. The chatbot was a revolutionary change in how people gather and sift through information, thanks to its sophisticated large language model that provides human-like responses and reactions. ChatGPT ushered in a wave of generative AI, in which artificial intelligence programs create new content, including photos, text, or computer code, in response to user prompts.
In a January study, OpenAI said 25% of all U.S. workers and 45% of those with postgraduate degrees use ChatGPT for work.
OpenAI’s success brought about a slew of competitors, including Claude, a large language model operated by Anthropic; Grok, operated by xAI (now SpaceX); and Llama, operated by Meta Platforms.
Microsoft was an early investor in OpenAI, although the company also has strategic partnerships with Amazon Web Services for computing capacity, Advanced Micro Devices for semiconductors, Oracle to help it scale AI workloads, and many others.
When can you trade OpenAI stock?
Once the company goes public, you can buy OpenAI stock directly at a brokerage. But the stock will also start appearing in index funds held by many 401(k)s. Nasdaq and Russell, which operate two of the major U.S. stock index providers, agreed this year to provide fast-track processes for all large IPOs to be added to their indexes more quickly. The Nasdaq-100 can add a stock on its 15th trading day after an IPO, and the Russell 1000 can add a stock on the fifth trading day. That’s important for popular index funds like the Invesco QQQ Trust and the iShares Russell 1000 ETF.
But you also don’t need to wait until the IPO to invest. Ark Investment Management, which is operated by famed investor Cathie Wood, invested $240 million in OpenAI earlier this year. Her popular Ark Innovation ETF currently holds $175 million in OpenAI stock, making up 2.6% of the portfolio, and the Ark Next Generation Internet ETF holds $43 million in shares, making up 2.57% of the portfolio. A third fund, the Ark Blockchain and Fintech Innovation ETF, holds $22 million in OpenAI stock, making up nearly 3% of that ETF’s portfolio.
No matter if or when you choose to buy, just recognize that this is a unique moment in the stock market. Only once has an IPO been valued at more than $1 trillion -- the 2019 IPO of Saudi Aramco, which now trades as Saudi Arabian Oil. This year, we could have as many as three: SpaceX, Anthropic, and OpenAI.
The OpenAI IPO isn’t public yet, so investors have plenty of time to research and consider if they want to be involved. But if you want to buy OpenAI stock now, ETFs like the ARK funds provide a clear avenue.
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Patrick Sanders has positions in Invesco QQQ Trust. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Meta Platforms, Microsoft, and Oracle. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
