OpenAI announces restructuring: Non-profit parent company enjoys $100 billion in equity, partnering with Microsoft to open a new chapter.

OpenAI announced that it is undergoing a major restructuring, preparing to establish a new "Public Benefit Corporation" (Public Benefit Corporation) while being held by the existing nonprofit parent company. In the future, the nonprofit parent company will hold at least over $100 billion in equity, and this amount may continue to rise with the company's valuation. If the employee equity sale goes smoothly, OpenAI's valuation is expected to soar to $500 billion, making it the highest-valued startup in the world.

OpenAI's Transition from Non-Profit to Controversial Commercialization

OpenAI was founded in 2015 as a non-profit organization, with the core mission of "advancing digital intelligence in a way that is most beneficial to humanity." Sam Altman and Elon Musk, co-founders of OpenAI, have repeatedly warned that advanced AI could pose existential risks to humanity, emphasizing the importance of governing AI with "moral and ethical" considerations.

However, as OpenAI rapidly grew, a management turmoil erupted in 2023. Specifically, CEO Altman was suddenly dismissed by the board, only to be reinstated a few days later. The incident highlighted the tug-of-war between the "nonprofit board focused on public good" and the "commercial expansion and fundraising needs," drawing more attention from the public towards OpenAI's decision-making and management structure.

Negotiate a new framework with Microsoft to create a public welfare company

As we enter the second half of 2024, OpenAI is in intensive negotiations with its largest investor, Microsoft (Microsoft). Microsoft has the priority to integrate OpenAI technology into its own products, and the focus of the negotiations is on how to attract more funding and expand the business scale while retaining the public good objectives.

Finally, on September 11th of this year, OpenAI Chairman Bret Taylor announced that the company will be held by a non-profit parent company, establishing a new "public-benefit corporation" and ensuring that the "non-profit nature" remains unchanged.

The scale of equity is astonishing, but regulatory and litigation challenges still need to be addressed.

According to the latest announcement, the non-profit parent company will receive at least $100 billion in equity, which may increase in the future as the company's valuation grows, potentially becoming one of the most resource-rich charitable organizations in the world. If the employee stock sale is completed, OpenAI's overall valuation is expected to soar to $500 billion, with the non-profit parent company holding approximately 20% of the shares.

At the same time, OpenAI and its largest investor Microsoft issued a joint statement on the same day, stating that both parties have signed a "non-binding cooperation memorandum" (MOU) and are in the process of signing a final contract. The news led to a rise of about 1.8% in Microsoft's stock price in after-hours trading.

However, OpenAI still faces multiple challenges, such as the attorneys general of California and Delaware reviewing OpenAI's financial and management structure, and expressing serious concerns about the safety of children related to AI products.

At the same time, former co-founder Musk has also sued OpenAI on the grounds of deviating from its philanthropic commitments and misleading investors. OpenAI countered the accusations, believing that this is Musk's attempt to slow down the company's development.

(The controversy over OpenAI's transformation is heating up! Meta takes legal action to intervene, aligning with Musk )

This article announces that OpenAI is reorganizing: the nonprofit parent company enjoys a stake worth billions of dollars and partners with Microsoft to open a new chapter. Originally appeared in Chain News ABMedia.