(Bloomberg) – After months of public pressure, Openai stepped back and worked partly to create a more conventional for-profit company, but its restructuring plan has not been blessed by key stakeholders: Microsoft Corp.
According to several people familiar with the matter, Microsoft has invested $13.75 billion in the startup, which remains the biggest retention among investors when ChatGpt Maker tries to reorganize. The software giant wants to ensure that any changes to the OpenAI structure fully protect Microsoft's investments, and they discussed the private deliberations anonymously. Microsoft is still actively negotiating details of Openai's proposal, people say.
Microsoft declined to comment. “We will continue to work closely with Microsoft and look forward to finalizing the details of this recapitalization in the near future,” Openai said in a statement.
Openai said on Monday it is moving forward to reorganize its for-profit division as a public welfare company, but has changed its plans so that the overall business will remain under the control of its nonprofit organization – effectively maintaining the outline of how the company is currently building.
Microsoft isn't the only party Openai needs to buy. State attorneys generals in California and Delaware oversee the conversion. Openai needs to provide fair market valuations of nonprofit shares in future nonprofits and requires state AGS to invest.
OpenAI CEO Sam Altman said in a letter to employees that he decided to maintain control of the nonprofit after discussions with the office of the citizen leader and the state attorney general. “We look forward to the details of the program in the ongoing conversation with them, Microsoft and our newly appointed nonprofit specialist,” Altman said.
The simplified for-profit structure is considered more attractive to investors, but in a call with reporters, Altman said the revised approach could still achieve the same goal even in nonprofits. With the proposed structure, Altman made it clear that SoftBank Group is ready to invest in its entire $30 billion as part of a recently announced funding round.
But Microsoft's approval will be key. The two said only Openai insiders, Microsoft and other early investors, currently have a direct say to approve the restructuring. As a result, only the group can weigh the restructuring plan, people say. However, among investors, Openai is currently only in talks with Microsoft.
Compared to other investors, Microsoft has a unique relationship with OpenAI because it has licensing and revenue sharing agreements with startups. One familiar with the discussion said Microsoft is currently negotiating these aspects of the contract, as well as its equity shares and other issues.
In addition to winning wins from Microsoft and state officials, Openai is also battling legal challenges over the restructuring of billionaire Elon Musk.
Openai co-founder Musk had previously asked a judge to prevent Openai from becoming a for-profit business. The judge rejected Musk's request but had allowed some of the lawsuits to proceed. Musk also filed an unsolicited and failed $97.4 billion to buy assets from nonprofits that control OpenAi.
Openai said Musk is trying to slow down to benefit his rival AI startup. Musk's attorney Marc Toberoff did not respond to a request for comment regarding Openai's update plan.
– Assisted with Brody Ford.
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