- OpenAI plans to restructure its for-profit arm into a public benefit company, removing the cap on investor returns, while keeping board control under its nonprofit parent.
- Microsoft, the largest investor in OpenAI, has not approved the new structure and is negotiating terms.
- State attorneys general are involved to oversee the fair value of nonprofit assets and address concerns over the conversion process.
OpenAI announced on Monday its intent to convert its for-profit division into a public benefit company, a change that removes previous limits on investor profits. The company’s nonprofit foundation will keep control of the new entity through an independent board to ensure business actions consider both public good and revenue, according to an official statement.
Sam Altman, CEO of OpenAI, emphasized the need for funding to achieve wide access for their Artificial Intelligence (AI) services. “We want to be able to operate and get resources in such a way that we can make our services broadly available to all of humanity,” Altman stated in a letter. As of the latest funding round in March, the company had a valuation of around $300 billion after raising $40 billion from investors.
The new structure faces uncertainty as Microsoft, which has invested $13.75 billion in OpenAI, has not signed off on the changes and is in talks about the details, Bloomberg reports. Altman said the firm’s business model shift could need investments reaching hundreds of billions, and possibly even trillions of dollars, to continue progress.
There has been pressure from alumni and outside groups voicing “deep concerns” about OpenAI’s restructuring. In January, former staff members, mostly from California, sent a letter urging the State Attorney General to review the process and prevent public assets from being diverted for private gain. Regulatory review will also include the attorneys general of California and Delaware reviewing how the nonprofit’s assets are valued in the new setup.
Under the planned structure, Altman’s authority would be reduced, requiring him to report to an independent board and removing his ability to make decisions alone or driven only by commercial goals. The revamp replaces a unique 2019 model that had capped investor returns at 100 times their original investments (source).
OpenAI is also facing legal challenges. Co-founder Elon Musk has sued the company over its direction, claiming it is becoming more like a traditional business. Musk previously attempted to acquire OpenAI for $97.4 billion, and the company responded with a countersuit last month.
Altman ended his public statement saying, “We want our nonprofit to be the largest and most effective nonprofit in history that will be focused on using AI to enable the highest-leverage outcomes for people.” The company continues to engage with civic leaders, Microsoft, and its new nonprofit commissioners as the transition moves forward.
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