Why OpenAI Shouldn’t Buy Back Employee Shares

On the public markets, the idea of companies that are burning cash also spending money on stock buybacks is a giant no-no. Yet for some reason, private tech investors are willing to give startups a pass for doing the same thing. Exhibit A is OpenAI, which we reported wants to use some of the $6.6 billion in cash it raised in its recent fundraising to buy shares from employees. 

That’s despite the fact that OpenAI could lose around $5 billion this year, largely because of the computing costs associated with the training and operation of its large language models. Its revenue is growing quickly, to be sure, but that doesn’t mean it will start generating cash anytime soon. In other words, OpenAI needs every penny of the money it raised to fund its operations.