Openai said Monday that it is pursuing a new restructuring plan after a conversation with the Delaware and California Attorney General.
Currently, Openai’s non-profit committee manages the organization’s for-profit operations. Under the new plan, Openai’s for-profit sector will be the Public Benefits Corporation (PBC), but will still be managed by Openai’s nonprofit organization.
The new restructuring plan may be enough to appease regulators and Openai investors who have poured billions of dollars into the company in hopes of returning one day. But you could also throw a wrench into Openai’s future plans, especially if the company is about to go public one day.
IPO route
Last December, Openai outlined a path that allows for commercial arms to be rotated from under the control of a nonprofit committee. This is bound by certain obligations, including charter provisions to ensure that artificial general information (AGI) benefits all humanity.
The plan came out the window on Monday. Currently, Openai manages a nonprofit organization and is set to become a major shareholder of the aforementioned PBC.
In addition to allowing Openai to operate like a traditional company, a simpler structure can open up to raise additional capital by publishing it through an IPO. Given the size of Openai, the vast amount of cash burning and the great interest of the public, the IPO appears to be something that may ultimately be considered.
Steven Diamond, a professor of corporate governance at Santa Clara University, told TechCrunch there is a very narrow path to becoming a public company under the newly proposed transition plan. Nonprofit organizations cannot be made public, but PBC is also possible.
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However, there are doubts about what Openai’s PBC owns in the IPO.
“My feeling is that there is a huge intellectual property value at Openai’s non-commercial level,” Diamond said in an interview. “But if the PBC owns and doesn’t have control over the core IP, but is licensed to use it, what is the IPO? That’s the challenge.”
Diamond pointed out that he doesn’t know exactly what details of Openai’s plans are, and that it is unclear whether it will ultimately succeed. In an email to TechCrunch, Openai spokesman Steve Sharpe said Openai’s nonprofit will continue to control the company’s technology, and while Openai is not currently planning to make it public, IPOs are “theoretically” possible under the proposed structure.
If Openai’s nonprofits actually manage the organization’s critical technologies, shareholders will not have much of a say in the company’s decisions, said Rose Chan Louis, the founding executive director of UCLA’s legal program on charities and nonprofits. Unlike buying stocks in a typical company, Openai shareholders should know that their impact on the company is limited.
“IPOs are much more difficult in this scenario,” Loui said in an interview with TechCrunch.
It’s bent in pressure
Openai is narrowed down to all edges during a reorganization attempt.
Last week, a group of former Openai employees asked the California and Delaware lawyer generals to block the conversion of Startup. Both attorney generals told TechCrunch that they are reviewing Openai’s new plans.
Openai’s proposal should appease the company’s biggest private investors, including Microsoft and SoftBank. Openai’s new plan gives the company a more traditional capital structure, meaning employees, investors and nonprofits will directly hold shares.
Microsoft has yet to congratulate the openly on the new corporate structure, Bloomberg reported Monday. Cloud providers want to ensure that the new structure properly protects billions of dollars in Openai investments. It is unclear whether other key stakeholders have approved the transaction.
No one has put more pressure on restructuring Openai than Elon Musk. The billionaire who co-founded Openai and now competed with it through AI startup Xai, filed a $97 billion purchase bid to raise the price of Openai’s non-profit assets and strengthened the for-profit transition for ChatGpt Maker. Musk also focuses on restructuring Openai in its lawsuits against Startup and Microsoft. Musk’s lawsuit accuss Openai of abandoning its non-profit mission to develop and distribute AGIs widely at its core.
Last week, a federal judge denied some of the open motions to dismiss the allegations in the Mask lawsuit. According to Diamond, this was a modest victory for Musk and could have played a role in Openai’s transformation course. However, during a briefing with media members on Monday, Altman reportedly denied the lawsuit would affect Openai’s plans.
Marc Toberoff, Musk’s lead lawyer in his case against Openai, told TechCrunch that it had a new corporate restructuring plan “nothing changes,” meaning Musk won’t drop the case that quickly.
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