OpenAI abandoned its plan to spin off its for-profit arm and instead is proposing converting it into a public benefit corporation under its nonprofit's control that would be valued at $300B. Under this new structure, the nonprofit would continue to oversee and control the for-profit arm, however, the latter could issue shares, as well as exchange the profit-sharing units of investors like Microsoft and Thrive Capital for equity.
The nonprofit would continue to own a stake in the for-profit arm, however OpenAI hasn't disclosed what exactly that would be — which is a big question for both state regulators and critics of the restructuring.
Not for Private Gain, a group of lawyers and former OpenAI employees, as well as a coalition of over 60 nonprofits, are arguing that the nonprofit might not get a fair value for its assets under OpenAI's latest proposal and are pressing attorneys general in Delaware and California to investigate the matter fully before giving approval.
In response, the Delaware attorney general hired an investment bank to help assess the value of the nonprofit's assets and determine the stake it should receive in the new public benefit corporation.
Microsoft, which is currently at odds with OpenAI over how much equity it should get in the new public benefit corporation, can also effectively block the conversion, and has hired its own investment banks to advise them on the process.
Then there's Elon Musk, who has entered into litigation to block the conversion in court, of which the case is set to go to trial next year.
OpenAI is pressed for time.
If the company doesn't complete the process by the end of the year, it risks losing up to $20B in funding from SoftBank. And OpenAI needs that cash to continue funding its expansion, which includes creating new AI models, shipping 100M AI companion devices beginning next year, and building out a global network of data centers as part of its Stargate infrastructure project.