OpenAI is reportedly “pursuing” plans to abandon its nonprofit roots and reorganize as a for-profit entity, a move that has led Sam Altman and his allies to threaten a “hostile takeover” and leadership attack. It may protect against opposition.
The company's board plans to reorganize as a public benefit corporation, an unusual structure in which the board considers both social impact and profit when making decisions. The Financial Times reported. Rival companies like Elon Musk's xAI and Amazon-backed Anthropic also use this structure.
Once the move is complete, the nonprofit organization that has overseen OpenAI since its founding in 2015 will remain in place, but will no longer control the company's operations.
The restructuring will allow OpenAI to take a “multi-pronged approach to fiduciary duties” and a “safe haven” from activist investors and attempts to challenge Mr. Altman, a person familiar with the discussions said. sources told the FT.
Mr. Altman was famously fired by the company's nonprofit board last fall. Altman was reinstated as CEO a few days later as part of talks that saw nearly all of the previous board members resign.
Last week, OpenAI raised a whopping $6.6 billion in a funding round, valuing the company at $157 billion. This is despite the fact that the company was rapidly burning through cash while developing its next AI model.
Sources familiar with OpenAI's thinking told the outlet that no final decisions have been made and that the restructuring is likely to take some time to complete. The nonprofit will acquire a stake in OpenAI's for-profit entity, but Altman is not expected to run it.
“OpenAI wants to maintain a social license with both a mission and an obligation while developing cutting-edge technology,” a source told the FT.
The Post has reached out to OpenAI for comment.
Reports about OpenAI's restructuring talks surfaced last month, on the same day that chief technology officer Mira Murati and two other executives resigned.
Their departures are the latest in a large exodus of top OpenAI executives who have resigned or taken sabbaticals since the beginning of the year.
OpenAI said in a statement that it is “committed to building AI that benefits everyone and is working with our board of directors to ensure we are best positioned to achieve our mission.”
When reports of a possible reorganization first surfaced last month, the company said in a statement: “Nonprofits are core to our mission and will continue to exist and thrive.”
The funding round was led by Josh Kushner's Thrive Capital, with participation from Microsoft, AI chip supplier Nvidia, Khosla Ventures, SoftBank, Abu Dhabi's state-owned MGX fund, Altimeter Capital, Fidelity and others.
The potential restructuring is said to be a sticking point for investors, who say that if the transformation is not completed within two years, investors may have to renegotiate OpenAI's valuation or receive a full refund. Reuters reported.
Altman, who has faced scrutiny over what critics describe as an aggressive and domineering leadership style, is expected to receive a stake in the reorganized OpenAI, although the exact terms remain unclear.
At a staff meeting last month, Mr. Altman called reports that his stake could reach 7% and be worth more than $10 billion “ridiculous.”
Elsewhere, critics have criticized Altman for prioritizing rapid progress over safety while building advanced AI that could pose a threat to humanity.
