OpenAI no longer intends to transition into a for-profit corporation.
Relax, AI fan! OpenAI U-turns on profits
Hot off the press! OpenAI, the mastermind behind ChatGPT, has swerved its move to become a for-profit company. The decision comes after a heated battle and stern opposition from investors, academics, and Elon Musk, its very own co-founder.
OpenAI finds itself in the thick of a turf war, with its CEO, Sam Altman, on one side against tech prodigy Musk along with former employees and AI scholars. The misfit corporation aimed to streamline its structure to boost investment opportunities. However, critics pointed fingers, stating a lack of oversight by its non-profit board would veer it away from the original mission - benefitting humanity through AI advancements.
In a major twist, OpenAI announced on Monday that instead of ditching its non-profit roots, it would instead remodel its for-profit subsidiary. This reconfiguration implies that investors and employees will now hold ordinary equity stakes instead of a share of the profits, while the non-profit retains control. Moreover, the for-profit unit will become a Public Benefit Company, focusing on the greater good in addition to profits.
Musk, who parted ways with OpenAI in 2018, has been relentless in his attempts to block the transformation into a for-profit business. He even filed a lawsuit in California, alleging a breach of contract and fraud by Altman and OpenAI for converting the company. Furthermore, the Tesla tycoon made a audacious $97.4bn bid to seize control of the group.
Musk's legal team, led by Marc Toberoff, dismissed the latest announcement as a watered-down proposal failing to address the core issues. They argued that the new structure still facilitates the benefits accruing to Altman, investors, and Microsoft, at the expense of the non-profit's charitable assets.
Altman was unmoved by the criticism, refuting any outside pressure in the decision to retain the non-profit control. "We're all in this for one reason - our mission. It's all about you and Elon," Altman quipped.
Negotiations lie ahead, as the attorneys-general of Delaware and California scrutinize OpenAI for compliance with charitable purposes in the conversion, and investors, including Microsoft, assess fair value for the non-profit's assets in the restructuring.
Delaware's attorney-general, Kathy Jennings, expressed her relief about the commitment to the public benefit, noting that the company now seems to be addressing her core concern.
OpenAI originally envisioned a larger war chest when it started as a research lab a decade ago, but the soaring demand for innovative AI tools has escalated its capital requirements. To stay competitive in the AI race, OpenAI launched its for-profit subsidiary in 2019. These changes unlocked the possibility of external investment, which is key for tech companies, as they seek ongoing growth and development.
The revised structure will enable investors to own equity in the public benefit corporation, granted they have invested capital in previous funding rounds. Any adversity encountered during the transition may lead to investors reclaiming their funds, or curtail SoftBank's commitment to the company by $10 billion.
Negotiations with Microsoft are underway to determine the stake size the US tech giant will secure in the public benefit corporation, and deliberations with independent advisers and attorneys-general are ongoing to finalize the non-profit's stake ownership. Despite these ongoing discussions, OpenAI remains optimistic about completing the transition this year.
In essence, OpenAI's transformation plan has taken a dramatic U-turn, with the non-profit arm staying the commander-in-chief while the company evolves and evolves as a Public Benefit Corporation. Elon Musk, it seems, still finds reasons to be salty.
In light of the turmoil over OpenAI's transition to a for-profit company, the organization has decided to restructure its subsidiary into a Public Benefit Company. This revised structure allows investors to hold ordinary equity stakes instead of direct profits, indicating a continued focus on the greater good in addition to profits.
Despite the recent announcement, Elon Musk's legal team continues to challenge the new structure, alleging that it still benefits Altman, investors, and Microsoft at the expense of the non-profit's charitable assets. The revised plan is now under investigation by attorneys-general of Delaware and California to ensure compliance with charitable purposes during the conversion.
