OpenAI is in talks with regulators to move to a for-profit company structure

OpenAI is moving forward in its quest to transform the $157 billion company’s nonprofit structure into a for-profit one, having begun preliminary discussions with regulators.

OpenAI is moving forward in its quest to transform the nonprofit into a for-profit company, having begun preliminary discussions with regulators.

According to sources familiar with the situation, OpenAI has entered the initial stage of discussions with the California attorney general’s office regarding the process of changing its corporate structure. Regulators are expected to scrutinize how the company values its highly profitable intellectual property portfolio, including the popular ChatGPT app.

According to sources familiar with the situation, OpenAI has entered the initial stages of discussions with the California attorney general’s office regarding the process of changing its corporate structure.

The Delaware attorney general’s office is also discussing the move with OpenAI, as evidenced by a letter sent to the company.

Transition to a for-profit entity

Founded in 2015 as a nonprofit research organization with a mission to create safe and useful artificial intelligence for humanity, OpenAI is considering a significant change to a more traditional commercial structure. Such a transition could make the company more attractive to investors, but raises questions about whether OpenAI can maintain its original idealistic principles.

The company’s new structure may make it more attractive to investors, but raises questions about whether OpenAI can maintain its original idealistic principles.

High costs

OpenAI declined to comment on talks with regulators, but emphasized that the nonprofit will remain even if the corporate structure is changed. “Our consultations with independent financial and legal advisors are ongoing, and any potential restructuring ensures that the nonprofit will exist and thrive, receiving the full value of its stake in OpenAI’s for-profit division and increased ability to fulfill its mission,” Bret Taylor, chairman of OpenAI’s nonprofit board, told Bloomberg News.

OpenAI’s nonprofit board chairman Bret Taylor told Bloomberg News.

In 2019, OpenAI created a for-profit subsidiary to cope with the high costs of developing AI models. In 2023, OpenAI CEO Sam Altman was fired and rehired by the company’s former nonprofit board. Altman’s resignation came amid tensions over balancing AI security and commercialization of OpenAI’s software.

The resignation came amid tensions over balancing AI security and commercialization of OpenAI’s software.

Valuable Intellectual Property

Unlike many other nonprofit organizations, OpenAI owns extremely valuable assets in the form of the proprietary chatbot ChatGPT and its associated artificial intelligence technology.

In California, the company has begun a dialogue with Attorney General Rob Bonta’s office and plans to present details of a restructuring plan once it is finalized, said the source, who wished to remain anonymous because of the confidentiality of the discussions.

The company has begun a dialogue with Attorney General Rob Bonta’s office and plans to present details of a restructuring plan once it is finalized, said the source, who requested anonymity because of the confidentiality of the discussions.