OpenAI faces state AG probe as $1T IPO faces new legal risk

A coalition of state attorneys general subpoenaed OpenAI for documents covering a broad range of its activities and impact on users, injecting regulatory uncertainty into the ChatGPT developer's plans for what could be the largest technology IPO in history.

"The scope of these document requests suggests regulators are examining not just data practices but the broader societal impact of AI deployment," said James Okafor, macro policy analyst at Edgen. "For a company preparing to go public, this introduces material disclosure risk."

The probe, announced June 12, demands internal records spanning OpenAI's operations and user effects. It arrives as the company targets a September public listing that could value it above $1 trillion, according to its confidential S-1 filing with the Securities and Exchange Commission on May 22. OpenAI's last private funding round in March raised $122 billion from Amazon, Nvidia, and SoftBank at an $852 billion valuation — already the largest private technology financing in history.

The investigation compounds a growing list of legal overhangs. OpenAI still faces an active copyright lawsuit from the New York Times, and legal analysts estimate total settlement exposure across all active cases at between $500 million and $5 billion. A separate lawsuit from Elon Musk was dismissed by a California jury in May after less than two hours of deliberation, removing what analysts had flagged as the biggest legal obstacle to the IPO timeline.

Revenue growth meets record losses

OpenAI's financial disclosures reveal a company growing at a historically rare pace while burning cash at an unprecedented scale. The company hit an annualized revenue run rate of $25 billion by March 2026, roughly tripling year over year since 2023. But it loses $1.22 for every dollar earned, driven by massive computing infrastructure costs for running ChatGPT across hundreds of millions of users. Projected full-year losses stand at $14 billion, with profitability not expected until 2029 or 2030 — a deliberate "grow now, profit later" strategy that mirrors Amazon's early years but at a speed with no historical precedent.

ChatGPT's weekly active users have stalled at roughly 900 million as competition from Google's Gemini and Anthropic's Claude intensifies. Anthropic, which filed its own confidential S-1 on June 1, reached a $965 billion valuation in its most recent round — surpassing OpenAI's $852 billion mark — and targets an October listing.

IPO window narrows

The regulatory probe lands at a pivotal moment for AI listings. SpaceX debuted on the Nasdaq on June 12 under the ticker SPCX, targeting a valuation between $1.75 trillion and $2 trillion. Anthropic and OpenAI are scheduled to follow within weeks of each other. Together, the three companies could draw well over $100 billion from public markets — against a U.S. IPO market that raised just $45 billion in all of 2025.

Goldman Sachs, Morgan Stanley, and JPMorgan are leading OpenAI's offering. The public S-1, which will disclose full financials, risk factors, and pricing details, must list all active investigations as material risks. If the state AG probe expands into formal enforcement action, it could trigger operational restrictions, fines, or forced changes to OpenAI's business model — any of which would reset valuation expectations not just for OpenAI but for the broader AI sector.

The last time a major technology company faced coordinated state-level investigations during its IPO process was Meta's 2012 debut, which saw the stock fall 38 percent in the six months after listing amid privacy concerns. OpenAI's bankers will need to convince investors that the regulatory environment has shifted enough to avoid a repeat.

This article is for informational purposes only and does not constitute investment advice.