- OpenAI, the popular AI research organization behind ChatGPT, is reportedly planning a significant restructuring of its core business
- OpenAI introduced the for-profit OpenAI LP entity in 2019 to secure funding from Microsoft and other investors.
- The removal of nonprofit control is expected to make OpenAI operate more like a typical startup, a move welcomed by investors who have poured billions into the company
- Shares of Microsoft Corp. last traded at US$432.11
OpenAI, the popular AI research organization behind ChatGPT, is reportedly planning a significant restructuring of its core business.
According to sources familiar with the matter, the company aims to transition into a for-profit benefit corporation, moving away from its current nonprofit board control. This strategic shift is expected to make OpenAI more appealing to investors.
Key changes and implications
The restructuring plan, first reported by Reuters, involves the creation of a new for-profit entity in which the existing OpenAI nonprofit will retain a minority stake. This move is anticipated to have substantial implications for the company’s governance and risk management strategies.
In a notable development, OpenAI’s CEO, Sam Altman, will receive equity in the new for-profit company for the first time. The company’s valuation could soar to US$150 billion post-restructuring, as it seeks to eliminate the cap on investor returns. This change is expected to attract significant interest from investors, including Thrive Capital and Apple (NDAQ:AAPL).
Governance and legal considerations
These proposed corporate structure changes will likely mean major governance changes at OpenAI. The plan is still under discussion with lawyers and shareholders, and the timeline for completion has not been set.
The restructuring comes amid a series of leadership changes at OpenAI. Longtime chief technology officer Mira Murati recently announced her departure, and president Greg Brockman is currently on leave. While not linked to the planned restructuring, these changes add another layer of complexity to the ongoing restructuring efforts.
Historical context and future prospects
Founded in 2015 as a nonprofit AI research organization, OpenAI introduced the for-profit OpenAI LP entity in 2019 to secure funding from Microsoft (NDAQ:MSFT) and other investors. The launch of ChatGPT in late 2022 catapulted OpenAI into the global spotlight, with the app becoming one of the fastest-growing applications in history, boasting more than 200 million weekly active users.
The removal of nonprofit control is expected to make OpenAI operate more like a typical startup, a move welcomed by investors who have poured billions into the company. The new structure will align OpenAI more closely with its competitors, such as Anthropic and Elon Musk’s xAI, both of which are registered as benefit corporations.
As OpenAI endures this period, the restructuring plan will no doubt reshape its business model, governance and investor relations. The company’s ability to manage these changes effectively will be crucial in maintaining its leadership position in the rapidly evolving AI industry.
This restructuring marks a pivotal moment for OpenAI, potentially setting a new standard for AI companies balancing profitability with social responsibility. Investors will be watching closely to see how these changes unfold and impact the company’s future.
Shares of Microsoft Corp. (NDAQ:MSFT) last traded at US$432.11, up nearly 15 per cent since the year began.
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