OpenAI completes for-profit recapitalization

OpenAI said Tuesday it has completed its recapitalization, splitting the AI ​​lab into a for-profit company housed within a nonprofit. It’s the end result of a complex legal process that its estranged co-founder, Elon Musk, has staunchly resisted.

Under the new structure, the OpenAI nonprofit will have legal control over a public benefit corporation called OpenAI Group, which is free to raise funding or acquire companies without legal restrictions. The Foundation will own a significant stake in OpenAI Group, and will appoint its board of directors.

“We believe that the world’s most powerful technology must be developed in a way that reflects the collective interests of the world,” Brett Taylor, president of OpenAI, wrote in a blog post. “The completion of our recapitalization gives us the ability to continue pushing the boundaries of AI, and a refreshed corporate structure to ensure progress serves everyone.”

Under the new structure, the OpenAI Foundation will own 26% of the for-profit organization, with additional shares guaranteed to be granted if the company continues to grow. Microsoft, an early investor in OpenAI, will own a stake of about 27%, worth about $135 billion, with investors and employees owning the remaining 47%.

According to a separate post on Microsoft’s blog, the deal will also expand Microsoft’s intellectual property rights to include OpenAI models through 2032. If OpenAI announces that it has achieved its long-term goal of artificial general intelligence, the deal will also require it to be submitted to an independent expert panel for verification.

Prior to this recapitalization, OpenAI had operated as a nonprofit under strict equity restrictions — a situation that became increasingly untenable as the company’s fundraising became more ambitious. In April, SoftBank announced an unprecedented $30 billion investment in OpenAI, on the condition that the company successfully transition into a for-profit corporation. The Information newspaper reported on Saturday that the final tranche of financing had been sent, indicating a potential breakthrough in the restructuring.

There have been a number of legal efforts to prevent or influence the restructuring, most notably from Elon Musk, who at one point offered to acquire the company for $97.4 billion. State attorneys general from California and Delaware have also investigated the process, and Taylor specifically cited it as having a positive impact on the discussions.

“We have made many changes as a result of those discussions and believe that OpenAI — and as a result, the audiences we serve — is better for them,” Taylor wrote.

In the wake of the news, CEO Sam Altman announced a live open broadcast with chief scientist Jacob Paczucki to answer audience questions. The event will start at 10:30 AM PT.