FT: Discussions on Equity Stake in New Public Benefit Corporation
According to a report by the Financial Times (FT) on May 11 (local time), OpenAI, the developer of ChatGPT, is currently negotiating with its largest investor, Microsoft (MS), to revise the terms of their partnership as the company restructures itself into a public benefit corporation (PBC) in which control remains with a nonprofit organization.
Citing multiple sources familiar with the negotiations, FT reported that the core issue is how much equity MS will receive in the newly reorganized OpenAI. The two parties are also reportedly considering revising the broad contractual terms that were established when MS first invested in OpenAI in 2019.
The existing agreement, which allows MS access to OpenAI’s artificial intelligence (AI) models and services and includes profit-sharing rights, is valid through 2030. Three sources familiar with the discussions stated that MS has proposed relinquishing some of its equity in OpenAI after the company’s conversion to a new public benefit corporation in order to secure access to new technologies developed after 2030.
Previously, on May 5, OpenAI announced that even after restructuring as a public benefit corporation (PBC), control over the entire business would remain with the nonprofit organization. Initially, OpenAI had sought to move entirely away from nonprofit control in pursuit of profit, but ultimately abandoned this plan and decided to maintain the nonprofit governance structure. A public benefit corporation is a company that pursues both profit and public interest.
Major investors in OpenAI are reportedly expressing concerns about this development. This is because, in practice, it is difficult to simultaneously pursue public interest and profit while maintaining control by a nonprofit organization.
Additionally, for OpenAI to restructure as a public benefit corporation, the company must prove to authorities in Delaware, where it is registered, that its profit-seeking plans are consistent with its public benefit mission. Kathy Jennings, Attorney General of Delaware, stated, "We will closely review whether the (PBC conversion) aligns with OpenAI’s nonprofit purpose."
Bloomberg News recently reported that MS remains the biggest opponent of OpenAI’s corporate restructuring. MS, which has invested $13 billion in OpenAI to date, is the company’s largest investor and holds a 49% stake.
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