OpenAI abandons plan to convert into a for-profit company, will remain a nonprofit

OpenAI has abandoned its plan to convert into a for-profit company and will instead maintain its nonprofit governance structure while transforming its commercial subsidiary into a public benefit corporation (PBC), the company announced on Monday.

The move comes after pressure from several fronts, including discussions with attorneys general from California and Delaware, criticism from former employees, and an ongoing lawsuit from co-founder Elon Musk, who had sought to halt the planned conversion.

Read: The Hypocrisy Saga: Elon Musk Vs. OpenAI

OpenAI Chairman Bret Taylor said in a statement that the nonprofit board will retain ultimate control over the organization, addressing concerns that the original restructuring plan would have diminished oversight of its AI development.

Meanwhile, the for-profit subsidiary will operate as a PBC similar to organizations like Anthropic and X.ai, with a focus on broader societal impact in addition to commercial success.

“We made the decision for the nonprofit to stay in control after hearing from civic leaders and having discussions with the offices of the Attorneys General of California and Delaware,” CEO Sam Altman said in a memo to employees.

The revised structure eliminates the previous cap on investor returns, which limited profits to 100 times initial investment before redirecting remaining funds to the nonprofit. Investors and employees will now own regular stock with no cap on potential appreciation, which OpenAI says will facilitate future fundraising efforts.

Musk’s lead attorney, Marc Toberoff, dismissed the new plan as a “cosmetic restructuring” that “changes nothing.”

“The founding mission remains betrayed,” Toberoff argued. “Elon’s complaint will continue, and he is hopeful the court will intervene to save OpenAI from this corruption.”

The announcement marks the latest upheaval at OpenAI, which has faced internal turmoil since Altman’s brief firing and reinstatement in 2023. Several senior leaders have departed recently, including the chief scientist and chief technology officer, with some expressing concerns about safety measures and testing practices.

OpenAI expects this reorganization will allow it to receive the full $30 billion investment from SoftBank announced earlier, helping solidify its position as one of the world’s most valuable private companies at $300 billion.

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