Open Letter: What every OpenAI employee should know after the 2025 tender offer–and how to plan for what’s next
In November 2024, SoftBank reportedly bought $1.5B of OpenAI stock from past and current employees in a tender offer. This was a big win for many employees of OpenAI. And, it was a big event for the IRS and California’s Franchise Tax Board (FTB) given that roughly one-third of those proceeds (about $500M) likely went to taxes.
Less than a year later, in October 2025, Open AI completed an additional $6.6M employee tender at a valuation near $500B–up from roughly $300B earlier in the year.
The reality is this: Some strategic choices likely cost OpenAI employees hundreds of millions in 2024. And with the 2025 tender now complete, billions more in avoidable taxes may have just been paid.
But it doesn’t have to be that way.
How profit participation units (PPUs) are taxed in OpenAI tender offers
Most technology companies grant a mix of incentive stock options (ISOs), non-qualified stock options (NSOs) and restricted stock units (RSUs) to employees. Each is taxed differently, but let’s talk specifically about OpenAI’s compensation, which centers on profit participation units, or PPUs.
PPUs are often used as an incentive for management, employees, or investors to align their interests with the performance of the company–without giving away actual equity control. OpenAI pairs PPUs with a capped-profit structure, setting a maximum return (a “cap”) that PPU holders can earn.
Although OpenAI is using a rather unusual incentive compensation structure, the thing to note is that employees selling PPUs is very much analogous to selling stock–which means a massive tax bill when the firm has done as well as OpenAI.
The way OpenAI’s profit capped-PPUs will be taxed is not certain, but it’s likely that employees who sell their PPUs have made an 83(b) election. If that’s the case, they will realize capital gains following the sale rather than ordinary income, leading to roughly the following tax structure (patterned after RSUs):
Hypothetical estimated taxation of PPUs sale in California (numbers rounded):
PPU grants value at date of vest: $1M*
PPU grants value at date of tender: $10M
Capital gain: $9M
Federal tax expected: $2M
State tax (CA) expected: $1M
*In some cases PPUs will be valued at $0 on the date of vest, but the entire eventual sale price is still a taxable capital gain so the numbers used in this calculation are still valid.
Important:
Tax character and rates depend on your exact grant documents, elections, residency, and timing. This is an illustration, not tax advice, and you should always consult with your CPA and counsel.
In this example, the $10M tender turns into $7M in cash after taxes–with $3M paid in capital gains taxes on that $9M gain.
Applied to the 2025 tender, which reached $6.6B at a ~$500B valuation, this could translate into over $2B in total employee taxes. (Ouch!)
But a majority of those taxes can often be deferred if you coordinate your sale with a tax-aware investment strategy–which is why you’re reading this letter.
How tax-aware long-short strategies work to legally offset capital gains tax on tenders
There’s no way to avoid the $9M capital gain in the example above, but with the right approach to taxes and investment strategy, you can offset much or all of it, giving you more control over when and how much tax you pay.
Within our Ultra Tax Efficient Wealth Management℠ (UTEWM) suite of services at Hendershott Wealth Management, we implement tax-aware long-short (TALS) strategies for suitable investors – which includes many OpenAI employees.
Tax-aware long-short is an advanced, research-backed investment strategy that systematically harvests tax losses to offset realized gains and significantly reduce what you owe in capital gains taxes.
This approach is designed to earn market returns despite realizing losses for your tax return–by enjoying gains on other investments that are kept unrealized and untaxed. These strategic losses automatically offset the taxable gains from participating in a tender offer–as dictated by the IRS’s own rules–while leaving your investment gains intact.
Both peer-reviewed research from AQR and our independent research at HWM demonstrate how the tax-aware long-short strategy can create large tax benefits while the underlying investments are generating profits.
The goal of tax-aware long-short is to generate those tax losses in both positive and negative market environments without adding market risk. Every component of the tax-aware long-short strategy—from how trades are paired, to how risk is hedged, to how the strategy is monitored—is engineered for balance, consistency, and maximized tax efficiency… whether the market is up or down.
Results vary with market conditions, but the mechanism is powerful and robust.
If you remember nothing else, remember this: A tax-aware long-short strategy will provide losses for your tax return that lower your capital gains tax bill. It will do this at the same time as providing market returns in your investment account. In this way, tax-aware long-short will reduce tax drag without sacrificing investment returns.
How tax-aware long-short strategies can decrease capital gains taxes from Open AI stock sales
Now that the 2025 OpenAI employee tender has taken place, here’s a hypothetical example of how a tax-aware long-short strategy can work in practice for someone selling PPUs:
- You sell your $1M in OpenAI PPUs for $10M.
- You partner with us to deploy that $10M into a diversified, tax-aware long-short portfolio, consisting of hundreds of long and short positions. This is important: The portfolio is designed specifically to largely track the market, earn a small additional return, and provide tons of opportunities to harvest tax losses along the way.
- The portfolio earns, say, 10% over the next year (bringing it to $11M in value; $1M in profits).
- Despite the market going up overall, some holdings within the long-short portfolio rise and others fall. We harvest losses on the stocks that decreased in price, and defer gains on the winners (consistent with the tax code). The short positions provide further losses to harvest, particularly given the market’s rise in this example, while keeping the portfolio’s market risk/exposure steady. Overall, the tax-aware long-short strategy can be expected to harvest roughly $7M in realized losses, at the same time as earning you – in addition to the $1M of market returns – another $7M in unharvested (deferred) gains.
- On paper, your tax return now has a large capital loss (from harvested losses) to offset your OpenAI gains—even though your portfolio value grew by $1M.
The result: Your original $9M in taxable gains on the OpenAI tender turns into a ~$2M net gain in the year of sale, with the $7M losses created in the tax-aware long-short strategy offsetting ~78% of what would have been a $3M tax bill.
That means you only owe ~$660,000 instead of ~$3M, so you save ~$2,340,000 in the first year alone–and those tax savings can continue to compound over time.
Why tax losses ≠ investment losses: A key wealth-building principle
Your investment portfolio can grow while the sequence and character of realized gains/losses are optimized to maximize your after-tax wealth. Less paid to the IRS; more retained by you.
This is the magic of experiencing tax alpha: extra returns through smarter tax strategy, not extra risk.
Deferring capital gains: The power of compound tax alpha
With the 2025 OpenAI tender now complete, it’s important to clarify: tax-aware long-short strategies don’t make taxes vanish. They defer taxes–legally, under IRS rules–so that more of your money stays invested and working for you. The magic is turning $10m in OpenAI PPUs into a well diversified portfolio, along with a plan for how you can spend that wealth without taking a big tax hit.
A key piece of this wealth building strategy is the compounding benefits of deferral–which means dollars not remitted to taxes this year can stay invested and experience compound growth. That logic is why long-term deferral is associated with higher after-tax wealth over time–and why savvy investors max out their retirement contributions.
Earning compound returns on the dollars that would have gone to taxes can potentially lead to a 30-50% increase in net worth over time.
Markets and implementation matter, so there’s no guarantee of a specific outcome. However, in volatile market environments, tax-aware long-short strategy implementations can produce cumulative net realized losses in excess of initial capital within a single year—even while maintaining pre-tax investment performance—allowing investors to offset large gains.
Bottom line: Your results will depend on your facts and market conditions, but the evidence-to-date suggests suitable investors can add 7 to 8 figures to their wealth over their investing lifetime.
The $2 billion timing mistake in OpenAI’s 2025 tender offer
Now you’ve seen how a tax-aware long-short strategy systematically harvests losses while deferring gains inside an investment model aimed at creating large tax benefits without increasing market exposure or giving up access to your money. The loss harvesting algorithm provides immediate tax benefits, and those benefits grow over time.
The mistake for OpenAI employees is the timing of the tender: October.
By completing the 2025 tender in October, OpenAI repeated its mistake from 2024. Timing matters because loss harvesting happens within the tax year of your gains; the October tender compresses the runway for harvesting losses to roughly ten weeks–whereas a January tender would have provided a full year to harvest losses that offset gains.
With a longer runway for tax management, selling employees could have used tax-aware long-short investing to materially trim their near-term tax bill. That timing gap can add up to billions at scale, and that would be OpenAI’s billion-dollar unforced error.
OpenAI employees after the 2025 tender: How to prepare for what’s next
If you participated in the October 2025 tender, you may already be feeling the weight of the resulting tax bill. And it isn’t too late to mitigate the tax hit – although tax-aware investing can’t wipe out the majority of the damage over the next few months, in many cases it will make a significant dent.
And whether you participated or you sat this tender offer out–either because the timing didn’t work for you or the taxes felt too steep–you now have an opportunity to plan differently for the next event.
Employee tenders are becoming a recurring feature for OpenAI and other major private tech firms. The key is looking ahead: 2026 and beyond will likely bring additional liquidity events. The decisions you make now can position you for far better after-tax outcomes next time.
Returning to the hypothetical example we shared above–this is how tax-aware long-short would have applied to OpenAI’s November 2024 tender offer:
- A CA-based OpenAI employee who tendered $10M in Nov 2024 owed roughly $3M of combined taxes in the illustration above, leaving $7M to invest.
- If that $7M was invested into an accelerated tax-aware long-short approach, it could reasonably have harvested ~$5M of losses over the last nine months while deferring >$5M of gains.
- If that same person tenders another $10M in 2025, those banked losses could offset ~56% of the new gain, cutting the modeled 2025 tax from ~$3M to ~$1.3M.
This example is illustrative and results are market-dependent, but here’s the takeaway:
You get the best results when you start planning today for tomorrow’s tax challenges.
How to get access to sophisticated tax-aware implementation after the tender (or before the next offer)
With the October 2025 tender now complete, many OpenAI employees are asking: what’s the smartest next step for my wealth?
At Hendershott Wealth Management, we offer tax-aware long-short investing through our partnership with AQR Capital Management and its Flex SMA product–and working with us is how you get it to work for you, both to cut your tax bill from selling your PPUs (or stock) and to plan for how to spend your newfound wealth without giving a big chunk up to taxes.
If you’re ready to see how the strategies inside our Ultra Tax Efficient Wealth Management℠ suite of services–most notably, tax-aware long-short–can help you keep more of what you earn through the next tender offer, head to hendershottwealth.com/contact.
You’ll get paired with one of our lead advisors for a complimentary 45-minute Discover Call.
We’ll take a look at your financial picture, help you assess your current and potential tax drag, and figure out if implementing a tax-aware long-short strategy is a smart next step for you.
If it’s not, we’ll point you in the right direction. But if it is—it could make a 7- or even 8-figure difference over your lifetime with the taxes you’ll mitigate now.
Either way, you’ll walk away from our call with clarity, insight, and a better understanding of how to make your wealth work harder—and smarter—for you.
Why having a tax-efficient strategy matters for tech tenders
The October 2025 OpenAI tender is now one of the largest employee liquidity events on record—valued at $500B. For employees who participated, this means a significant payday and potentially one of the biggest collective tax bills ever triggered by a private-company transaction.
OpenAI isn’t alone. Large private tech companies are increasingly using employee tenders to provide liquidity while staying private longer:
Large private tech companies are increasingly using employee tenders to provide liquidity while staying private longer:
- SpaceX conducted significant employee tenders in Dec 2024 and pursued another program at a reported $400B valuation in July 2025
- Stripe facilitated employee tender activity valuing the company at $65B (Apr 2024) and later $91.5B (Feb 2025)
- Fanatics explored (and likely executed) an employee tender around Sep 2024
These transactions are triggering massive tax bills, underscoring why tax‑aware planning should be central to private‑company liquidity—not an edge case. And after reading this letter, you know you can be ready when it’s your turn to take advantage of a tender offer.
Frequently Asked Questions
Does participating in a tender automatically mean capital gains for me?
Not always. Tax character depends on your equity type (e.g., PPUs/profits interests vs. RSUs/options), 83(b) election, holding period, and other facts. The IRS treats capital gains/losses and netting rules per Publication 550 and Topic 409; outcomes vary by circumstance.
Source: IRS Publication 550 (2024), Investment Income and Expenses
Are PPUs eligible for QSBS (Section 1202)?
QSBS generally applies to C-corp stock originally issued to you and held for the required period (historically five years; recent law changes may adjust specifics). PPUs/profits interests are typically partnership-style interests, so QSBS usually does not apply—but confirm with counsel.
Source: 26 U.S. Code § 1202 – Partial exclusion for gain from certain small business stock
Equity Methods: Profit Interest Units, Explained
Can I use exchange strategies to accomplish the same results as tax-aware long-short?
Exchange strategies can also work to transform concentrated stock into a well-diversified portfolio without triggering capital gains taxes – although these strategies have constraints that make them inappropriate for many situations. But in a tender offer you sell your shares so there is no way to use an exchange.
Can tax-aware long-short run afoul of the wash-sale rule?
Any tax-aware strategy must observe wash-sale rules (and related short-sale rules). Implementations like AQR’s Flex SMA are designed with these constraints in mind, but compliance and appropriate record keeping are both critical.
Source: IRS Publication 550 (2024), Investment Income and Expenses
What about philanthropy (DAFs, restricted/private stock)?
Pre-liquidity donations of private shares can be powerful but complex (transfer restrictions, charity acceptance, qualified appraisal). A great feature of TALS is that you can defer taxes now while your goals mature–if you end up funding a foundation, for example, you can use the appreciated TALS assets without triggering a tax bill. Of course, you should get deal-specific tax and legal advice.
Source: DAF Giving 360 – A Tax-Smart Approach to Maximize Your Philanthropic Impact
Fidelity Charitable®: Potential Tax Benefits of Donating Privately Held C-Corp Stock
Disclaimer:
All investing involves risk, including the potential loss of principal, and there is no guarantee that any investment plan or strategy will be successful.
Advisory services are provided by Hendershott Wealth Management, LLC (“HWM”), an investment advisor registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training.
Content discussed is for information purposes only and does not constitute an offer, or solicitation of an offer, or any advice, or recommendation to purchase any securities or other financial instruments–and may not be construed as such.
All information or ideas provided should be discussed in detail with an advisor, accountant, or legal counsel prior to implementation–and all examples are hypothetical, not reflective of actual executed transactions or client experiences.
The realized tax benefits associated with tax-aware strategies may be less than expected or may not materialize due to the economic performance of the strategy, an investor’s particular circumstances, prospective or retroactive change in applicable tax law, and/or a successful challenge by the IRS. In the case of an IRS challenge, penalties may apply. The discussed tax-aware strategies have additional costs that will increase investors’ expenses and as a result will reduce returns.
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When trading these instruments, one could lose the full balance of their account. It is also possible to lose more than the initial deposit when trading derivatives and using leverage. All funds committed to such a trading strategy should be purely risk capital.
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