Charitable cause: Altman speaks at a conference in Seattle, Washington. His ouster, and then re-engagement, followed tensions with the board over balancing AI safety with the pressure to commercialise OpenAI’s software, among other issues. — AFP
SAN FRANCISCO: OpenAI is advancing in its bid to transform the non-profit structure of the US$157bil company into a for-profit business by having preliminary discussions with regulators.
The company is in early talks with the California attorney-general’s office over the process to change its corporate structure, according to two people familiar with the matter.
The process is likely to involve regulators scrutinising how OpenAI values a portfolio of highly lucrative intellectual property, such as its ChatGPT app.
The attorney-general in Delaware also has been in communication about the nonprofit to for-profit shift, as detailed in a letter to OpenAI.
OpenAI, founded in 2015 as a non-profit research organisation with an idealistic mission of building artificial intelligence (AI) that would be safe and beneficial to humanity, is considering a significant shift towards a more conventional for-profit structure.
A simplified for-profit structure is considered more attractive to investors, although it could open the door to questions about whether the company is upholding its original do-gooder public mission.
OpenAI declined to comment on talks with regulators, but said that the non-profit would continue to exist in any potential corporate restructure.
“While our work remains ongoing as we continue to consult independent financial and legal advisors, any potential restructuring would ensure the non-profit continues to exist and thrive, and receives full value for its current stake in the OpenAI for-profit with an enhanced ability to pursue its mission,” OpenAI non-profit board chairman Bret Taylor said in a statement to Bloomberg News.
In 2019, OpenAI created a capped for-profit subsidiary to help fund the high costs of AI model development, and about a year after OpenAI’s chief executive officer Sam Altman was fired and rehired by its former non-profit board.
Altman’s ouster followed tensions with the board over balancing AI safety with the pressure to commercialise OpenAI’s software, among other issues.
Unlike many other non-profits, OpenAI holds incredibly valuable intellectual property in the form of its proprietary ChatGPT chatbot and related AI technology.
In California, the company has opened a dialogue with the office of attorney-general Rob Bonta and will submit the details of its restructuring plan after the proposal is finalised, according to a person who declined to be identified because the discussions are private.
A spokeswoman for Bonta’s office said in a statement it is “committed to protecting charitable assets for their intended purpose”, without commenting on any discussions with OpenAI.
The move will allow it to maintain its mission for social good while operating as a for-profit business, OpenAI chief strategy officer Jason Kwon told employees during a staff meeting in late September, according to a person familiar with the matter.
Kwon told employees this new structure would preserve a non-profit arm that would own a material amount of the for-profit entity, said the person, who declined to be identified.
What stake the non-profit will receive in the for-profit, and how OpenAI’s assets are valued, will be key factors in regulatory approvals for the restructuring, according to legal experts.
“It’s not as simple as just turning off your non-profit status,” said Daren Shaver, a San Francisco-based partner at Hanson Bridgett LLP. “Whatever value those assets have has to be properly accounted for.”
The process in California, which would involve going back and forth with Bonta’s office, typically can take a couple of months for an ordinary non-profit, Shaver said.
But because California law requires whatever value is assigned to the non-profit assets to be distributed to a charitable cause, and OpenAI’s top asset is its intellectual property, the review could be complicated and drawn-out. — Bloomberg
