OpenAI says nonprofit will retain control of company, bowing to outside pressure
OpenAI has bowed to pressure from civic leaders and ex-employees, announcing in a blog post on Monday that its nonprofit would retain control of the company even as it restructures into a public benefit corporation.
The company, which is backed by Microsoft and was recently valued at $300 billion in a funding round led by SoftBank, said it made the decision after discussing the matter with the attorneys general of California and Delaware.
“The TLDR is that with the structure we’re contemplating, the not-for-profit will remain in control of OpenAI,” Bret Taylor, OpenAI’s board chairman, said in a video call with reporters. “We will be converting the limited liability company, that is a subsidiary of that nonprofit, to a public benefit corporation. By doing so, it will change the equity structure of that company so that employees, investors and the not-for-profit can own equity in that PBC.”
Taylor said OpenAI had commissioned outside financial advisors to advise on the recapitalization. He declined to share how much of a stake the nonprofit would have in the company.
OpenAI CEO Sam Altman said on the call that he was “very happy that the nonprofit and the PBC will have the same mission.” He said the board and stakeholders agreed with the decision.
OpenAI is currently enmeshed in a heated legal battle with Elon Musk, who co-founded the group as a nonprofit research lab in 2015. Musk is trying to keep OpenAI from converting into a for-profit company as he competes in the generative AI market with his own startup, xAI.
Altman was asked about the dispute on Monday’s call.
“We are obsessed with our mission and what it takes to fulfill that,” he said. “You all are obsessed with Elon, that’s your job — like, more power to you. But we are here to think about our mission and figure out how to enable that. And that mission has not changed.”
Led by Altman, OpenAI has been commercializing products in recent years, most notably its viral ChatGPT chatbot, which was launched in late 2022. The company is still overseen by a nonprofit parent and has faced significant hurdles in its goal to restructure into a for-profit, due largely to Musk. A Musk-led group offered to buy OpenAI in February for $97.4 billion, a bid that was swiftly rejected.
OpenAI’s hybrid structure has included a capped-profit limited partnership that was created in 2019. The original nonprofit is the controlling shareholder and would have been spun out as an independent entity if OpenAI had succeeded in its efforts. With that change no longer taking place, the nonprofit retains control of the majority of shares and OpenAI’s investors receive convertible notes that will turn into equity.
A group of ex-OpenAI employees, Nobel laureates, law professors and civil society organizations sent a letter last month to attorneys general in California and Delaware requesting that they halt the startup’s restructuring efforts out of safety concerns.
In the letter, which was delivered to OpenAI’s board, the group wrote that restructuring to a for-profit entity would “subvert OpenAI’s charitable purpose,” and “remove nonprofit control and eliminate critical governance safeguards.”
This is a developing story. Please check back for updates.
