OpenAI in Talks with California Regulators to Become For-Profit Company

OpenAI Speaks to California Attorney General About Becoming For-Profit Company

Sam Altman-led OpenAI is in early talks with the California attorney general's office to change its corporate structure in a bid to become a for-profit business, Bloomberg News reported on Monday, citing two people familiar with the matter. OpenAI and a representative for the California Attorney General did not immediately respond to Reuters' requests for comment. A shift to being a for-profit company would mark a drastic reversal in governance structure for the AI pioneer, which was founded in 2015 as a non-profit AI research lab. However, the move would make the firm more attractive to investors. Reuters first reported in September that Microsoft-backed OpenAI was working on a plan to restructure its core business into a for-profit benefit corporation no longer governed by its non-profit board.

OpenAI in talks with California to become for-profit company, Bloomberg News reports

(Reuters) - Sam Altman-led OpenAI is in early talks with the California attorney general's office to change its corporate structure in a bid to become a for-profit business, Bloomberg News reported on Monday, citing two people familiar with the matter. OpenAI and a representative for the California Attorney General did not immediately respond to Reuters' requests for comment. A shift to being a for-profit company would mark a drastic reversal in governance structure for the AI pioneer, which was founded in 2015 as a non-profit AI research lab. However, the move would make the firm more attractive to investors. Reuters first reported in September that Microsoft-backed OpenAI was working on a plan to restructure its core business into a for-profit benefit corporation no longer governed by its non-profit board. The OpenAI non-profit will continue to exist and own a minority stake in the for-profit company, sources then told Reuters. Last month, the ChatGPT maker closed a $6.6 billion funding round, which could value the company at $157 billion and cement its position as one of the most valuable private companies in the world. (Reporting by Deborah Sophia in Bengaluru; editing by Alan Barona)

OpenAI in talks with California to become for-profit company, Bloomberg News reports

Nov 4 (Reuters) - Sam Altman-led OpenAI is in early talks with the California attorney general's office to change its corporate structure in a bid to become a for-profit business, Bloomberg News reported on Monday, citing two people familiar with the matter. OpenAI and a representative for the California Attorney General did not immediately respond to Reuters' requests for comment. A shift to being a for-profit company would mark a drastic reversal in governance structure for the AI pioneer, which was founded in 2015 as a non-profit AI research lab. However, the move would make the firm more attractive to investors. Reuters first reported in September that Microsoft-backed (MSFT.O), opens new tab OpenAI was working on a plan to restructure its core business into a for-profit benefit corporation no longer governed by its non-profit board. The OpenAI non-profit will continue to exist and own a minority stake in the for-profit company, sources then told Reuters. Last month, the ChatGPT maker closed a $6.6 billion funding round, which could value the company at $157 billion and cement its position as one of the most valuable private companies in the world. Reporting by Deborah Sophia in Bengaluru; editing by Alan Barona Our Standards: The Thomson Reuters Trust Principles., opens new tab

ChatGPT parent OpenAI in talks with California to become for-profit...

Sam Altman-led OpenAI is in early talks with the California attorney general's office to change its corporate structure in a bid to become a for-profit business, Bloomberg News reported on Monday, citing two people familiar with the matter. OpenAI and a representative for the California Attorney General did not immediately respond to Reuters' requests for comment. A shift to being a for-profit company would mark a drastic reversal in governance structure for the AI pioneer, which was founded in 2015 as a non-profit AI research lab. However, the move would make the firm more attractive to investors. Reuters first reported in September that Microsoft-backed OpenAI was working on a plan to restructure its core business into a for-profit benefit corporation no longer governed by its non-profit board. The OpenAI non-profit will continue to exist and own a minority stake in the for-profit company, sources then told Reuters. Last month, the ChatGPT maker closed a $6.6 billion funding round, which could value the company at $157 billion and cement its position as one of the most valuable private companies in the world.

OpenAI in Talks with Regulator to Become For-Profit Company

In 2019, OpenAI created a capped for-profit subsidiary OpenAI holds incredibly valuable intellectual property The company plans to change to a public benefit corporation OpenAI is advancing in its bid to transform the non-profit structure of the $157 billion (roughly Rs. 13,20,727 crore) company into a for-profit business by having preliminary discussions with regulators. The company is in early talks with the California attorney general's office over the process to change its corporate structure, according to two people familiar with the matter. The process is likely to involve regulators scrutinising how OpenAI values a portfolio of highly lucrative intellectual property, such as its ChatGPT app. The attorney general in Delaware also has been in communication about the nonprofit to for-profit shift, as detailed in a letter to OpenAI. OpenAI, founded in 2015 as a nonprofit research organisation with an idealistic mission of building artificial intelligence that would be safe and beneficial to humanity, is considering a significant shift toward a more conventional for-profit structure. A simplified for-profit structure is considered more attractive to investors, although it could open the door to questions about whether the company is upholding its original do-gooder public mission. OpenAI declined to comment on talks with regulators, but said that the nonprofit would continue to exist in any potential corporate restructure. "While our work remains ongoing as we continue to consult independent financial and legal advisors, any potential restructuring would ensure the nonprofit continues to exist and thrive, and receives full value for its current stake in the OpenAI for-profit with an enhanced ability to pursue its mission," OpenAI nonprofit board chairman Bret Taylor said in a statement to Bloomberg News. In 2019, OpenAI created a capped for-profit subsidiary to help fund the high costs of AI model development. In 2023, OpenAI's Chief Executive Officer Sam Altman was fired and rehired by its former nonprofit board. Altman's ouster followed tensions with the board over balancing AI safety with the pressure to commercialise OpenAI's software, among other issues. Unlike many other nonprofits, OpenAI holds incredibly valuable intellectual property in the form of its proprietary ChatGPT chatbot and related artificial intelligence technology. In California, the company has opened a dialogue with the office of Attorney General Rob Bonta and will submit the details of its restructuring plan after the proposal is finalised, according to a person who declined to be identified because the discussions are private. A spokeswoman for Bonta's office said in a statement it is "committed to protecting charitable assets for their intended purpose," without commenting on any discussions with OpenAI. The company plans to change to a public benefit corporation, which Bloomberg previously reported. The move will allow it to maintain its mission for social good while operating as a for-profit business, OpenAI Chief Strategy Officer Jason Kwon told employees during a staff meeting in late September, according to a person familiar with the matter. Kwon told employees this new structure will preserve a nonprofit arm that would own a material amount of the for-profit entity, said the person, who declined to identified. What stake the nonprofit will receive in the for-profit, and how OpenAI's assets are valued, will be key factors in regulatory approvals for the restructuring, according to legal experts. "It's not as simple as just turning off your nonprofit status," said Daren Shaver, a San Francisco-based partner at Hanson Bridgett LLP. "Whatever value is those assets has to be properly accounted for." The process in California, which would involve going back and forth with Bonta's office, typically can take a couple of months for an ordinary nonprofit, Shaver said. But because California law requires whatever value is assigned to the nonprofit assets to be distributed to a charitable cause -- and OpenAI's top asset is its intellectual property -- the review could be complicated and drawn-out. "It's about convincing the attorney general effectively that the assets are going to the right place," Shaver said. Delaware State Attorney General Kathleen Jennings asked OpenAI in an October 9 letter to submit its conversion plans, once they are worked out, for review by lawyers in her office's fraud and consumer protection division. OpenAI's conversion would also require following up with the secretaries of state in Delaware and California on certain procedures as well as state and federal tax authorities. Under the terms of its latest investment round, OpenAI's recent funding could convert to debt if the restructure doesn't happen within two years, the New York Times has reported. © 2024 Bloomberg LP

OpenAI in talks with regulators to become a for-profit company: Report

OpenAI, the creator of ChatGPT, is reportedly in preliminary talks with California and Delaware regulators with the goal of transforming the firm into a for-profit structure. The company, which is currently valued at $157 billion, has opened a dialogue with the office of Attorney General Rob Bonta in California and his counterpart in Delaware, according to Bloomberg, citing sources familiar with the matter. Reuters first reported in September that OpenAI was working on a plan to restructure its core business into a for-profit company that will no longer be controlled by its non-profit board. However, a key challenge in the discussions is valuing OpenAI's intellectual property, which includes the highly lucrative large language model chatbot. The process could be complex and drawn out due to California law, which requires value assigned to nonprofit assets to be distributed to a charitable cause, but OpenAI's primary assets are its intellectual property. However, a simplified for-profit structure is considered more attractive to investors than a nonprofit research organization. The transformation could also raise questions about whether the company, which was founded in 2015, is upholding its original benevolent public mission of building AI products that would be safe and beneficial to humanity. In May 2023, tech billionaire Elon Musk questioned the legality of the transition to for-profit following a $50 million investment into the firm. "OpenAI was created as an open-source, non-profit company to serve as a counterweight to Google, but now it has become a closed-source, maximum-profit company effectively controlled by Microsoft," he said at the time. Musk sued OpenAI and CEO Sam Altman in February 2024 for breach of contract but dropped the lawsuit in June. In a statement to Bloomberg, OpenAI nonprofit board chairman Bret Taylor said the nonprofit would continue to exist as part of any new corporate structure, adding: "Any potential restructuring would ensure the nonprofit continues to exist and thrive and receives full value for its current stake in the OpenAI for-profit with an enhanced ability to pursue its mission." The firm is "committed to protecting charitable assets for their intended purpose," said a spokesperson for Bonta's office. The company created a capped for-profit subsidiary to help fund the high costs of AI model development in 2019. A period of brief turmoil followed, including CEO Sam Altman's brief firing and rehiring. Tensions on the nonprofit board mounted over balancing AI safety with the pressure to commercialize it. Related: OpenAI says latest o1 model on 'new level,' can 'think before it answers' On Oct. 23, long-time OpenAI safety researcher Miles Brundage quit the firm, stating that he planned to start a new nonprofit or join an existing one to work on AI policy research and advocacy. In early October, it was reported that OpenAI was unlikely to turn a profit until 2029 after hitting $100 billion in revenue, as it was projected to incur a loss of about $5 billion in 2024.