OpenAI has effectively abandoned its plan to transition into a for-profit corporation, a plan it had been pursuing for about a year. This decision comes after opposition from several voices, including Tesla CEO Elon Musk.
Bret Taylor, the chairman of the OpenAI board, announced on the company’s blog on the 5th (local time) that “OpenAI was established as a nonprofit organization” and that “a nonprofit organization will continue to supervise and control OpenAI.”
The for-profit limited liability company (LLC) under OpenAI’s nonprofit is still planned to transition into a public benefit corporation (PBC), similar to competitors Anthropic and xAI. However, this differs from OpenAI’s prior focus, which was on removing the nonprofit’s control over the major decisions of its for-profit subsidiary.
Sam Altman, CEO of OpenAI, mentioned in a letter to employees and stakeholders that “after hearing from civic leaders and discussions with the Attorney General’s Offices of California and Delaware, the decision was made for the nonprofit to retain control.” He added that he looks forward to further discussions on the plan’s details with these parties, Microsoft (MS), and newly appointed nonprofit committees.
The recent announcement from OpenAI was also likely influenced by a ruling from a federal court in Oakland, California, which rejected OpenAI’s request to dismiss a lawsuit filed by Musk to block the transition to a for-profit entity. Judge Yvonne Gonzalez Rogers found Musk’s core claim—that OpenAI broke promises made at its founding—credible, and a trial was scheduled for March next year.
The catalyst for OpenAI’s consideration to alter its governance structure seems to be the “Altman ouster incident,” triggered by a sudden notice from the nonprofit board in November 2023. Furthermore, when OpenAI secured funding of $40 billion (approximately 55 trillion won) from investors like SoftBank in March, the conversion to a for-profit was reportedly a condition. According to Reuters, Altman stated that they would still be able to receive investment from SoftBank following this announcement.
While the move to a for-profit status and the expansion of Altman’s authority have been halted, efforts to secure capital are expected to continue. CEO Altman explained that “the current complex cap structure made sense when it seemed there would be a single generalized artificial intelligence (AGI) effort, but it’s not suitable now with multiple excellent AGI companies existing.” He added, “we are transitioning to a typical capital structure where all stakeholders hold shares. This is not a sale, but a mere structural change.”