OpenAI Takes Another Step Closer to IPO
In the latest development, SoftBank has approved the remaining $22.5 billion investment in OpenAI. This financing is contingent on OpenAI completing its restructuring by year-end, paving the way for an initial public offering (IPO).
Meanwhile, various unconventional maneuvers by Sam Altman have been exposed:
He bypassed investment banks and lawyers, relying primarily on his inner circle and negotiating directly with companies like NVIDIA and AMD to orchestrate chip deals worth $1.5 trillion.
This non-standard transaction process has resulted in agreements lacking detailed financial terms and creating circular trading structures, drawing widespread criticism from analysts.
If OpenAI Fails to Restructure, Investment Amount Will Decrease
SoftBank is going all out this time.
With the second tranche of $22.5 billion added to the previous $7.5 billion, SoftBank’s total investment in OpenAI has reached $30 billion.
However, this money does not come without conditions: OpenAI must complete its corporate restructuring by year-end, transitioning from a non-profit organization to a public benefit corporation (PBC), thereby paving the way for an IPO.
This move is part of the $41 billion funding round announced by OpenAI in April, which pushed the company’s valuation to $260 billion.
However, SoftBank has secured its own exit strategy: if OpenAI fails to complete the restructuring by year-end, the investment amount will be reduced from $30 billion to $20 billion.
Altman’s “Lone Wolf” Negotiation Tactics Shock Wall Street
According to the Financial Times, when negotiating chip deals worth $1.5 trillion, Altman sidelined OpenAI’s investment bank advisors and legal teams.
When speaking directly with tech giants such as NVIDIA, Oracle, AMD, and Broadcom, Altman was accompanied only by a few key executives:
President Greg Brockman, Chief Financial Officer Sarah Friar, and newly appointed Head of Infrastructure Financing Peter Hoeschele.
Among the three, Brockman is a founding team member of OpenAI who previously served as CTO at Stripe.
An insider commented: “Altman is a visionary, but Brockman and his team are the ones who actually make these deals happen. He is quiet and always works behind the scenes, but when things get complicated, Brockman is the one pushing things forward.”
Sarah Friar was formerly an equity research analyst at Goldman Sachs and held senior financial positions at Salesforce and Block. She joined OpenAI last year after stepping down as CEO of the social networking app Nextdoor.
Peter Hoeschele was previously a consultant at Deloitte and now oversees efforts to enhance OpenAI’s computing power supply.
What frustrates Wall Street the most is that the financial terms for these OpenAI transactions remain vague.
Altman’s team operates on the philosophy of “technology first, financial details later.”
They structured the deals as multi-year contracts with payments tied to various milestones. If future demand changes or funding dries up, OpenAI retains the ability to scale back chip orders.
So, did NVIDIA not bring lawyers to the negotiations either? Indeed they didn’t.
Insiders stated, “Altman and Jensen Huang have a long-standing relationship and communicate frequently. This deal was essentially negotiated between the two of them.”
The two parties reached an astonishing agreement: NVIDIA will invest $100 billion in OpenAI, while OpenAI commits to spending $350 billion on NVIDIA to purchase 10 gigawatts (GW) of chips. Throughout the entire negotiation process, neither side sought advice from external advisors.
△ A Relationship Built on Closeness
Negotiations with AMD actually began years ago. This time, AMD CEO Lisa Su finally presented a compelling offer: granting OpenAI warrants to purchase up to 10% of AMD’s shares at $0.01 per share. In exchange, OpenAI committed to purchasing 6 GW of chips.
The $300 billion, five-year partnership with Oracle began by chance. In mid-2024, the original client for a data center being built by Oracle in Abilene, Texas, suddenly withdrew. Clay Magouyrk, then head of Oracle Cloud Infrastructure, immediately approached OpenAI, which promptly took over the project.
A common characteristic of these transactions is that they rely on trust rather than contractual details. Altman believes this approach simplifies the transaction process and reduces adversarial dynamics.
However, whether these commitments to generate hundreds of billions in revenue will materialize remains uncertain.
Altman is expanding his advisory team. In September, he recruited Mike Liberatore, former CFO of Elon Musk’s xAI, as Chief Business Officer. Perhaps more major deals are yet to come.
References
- SoftBank approves remaining $22.5 billion of OpenAI investment, the Information reports — SoftBank has approved a second installment of $22.5 billion to complete its $30 billion investment in OpenAI, tech news website the Information reported on Saturday.
- 967b0d78 62df 4eea a441 8ce3a5d03564 — www.ft.com/content/967b0d78-62df-4eea-a441-8ce3a5d03564