OpenAI abandons for-profit plan amid criticism

OpenAI abandons for-profit plan amid criticism, remaining under nonprofit control. Restructuring to Public Benefit Corporation proceeds with investor stock, impacting SoftBank's funding commitment.

OpenAI Scraps For-Profit Plan

• Key Decision: OpenAI will remain under the control of its founding nonprofit board. They are abandoning the plan to split off commercial operations into a for-profit company.
• Reasoning: Mounting pressure from critics and discussions with Attorneys General of California and Delaware led to this decision.
• Previous Plan: OpenAI was planning a restructuring to become a Public Benefit Corporation, with the nonprofit having limited influence. CEO Sam Altman was expected to receive equity. This plan also would have removed the cap on investor returns.
• Criticism: Former employees and Elon Musk (a co-founder) criticized the plan, arguing it would reduce oversight of OpenAI's technology. Musk even filed a lawsuit.
• Musk's Lawsuit: A judge agreed that Musk adequately pleaded that OpenAI breached an implied contract and unjustly benefited from his early investments.
• Restructuring Details: OpenAI still plans significant changes, transitioning the for-profit LLC to a Public Benefit Corporation with the same mission, using a "normal capital structure where everyone has stock."
• Financial Implications: SoftBank committed $30 billion in funding, but stipulated it would reduce its contribution to $20 billion if OpenAI didn't restructure into a fully for-profit entity by the end of 2025.
• Official Statements:
  • Sam Altman: "We made the decision for the nonprofit to stay in control after hearing from civic leaders..."
  • Altman: "The for-profit LLC under the nonprofit will transition to a Public Benefit Corporation (PBC) with the same mission...