OpenAI Ends Profit Cap in Restructure, Microsoft Yet to Sign Off

OpenAI is removing limits on how much money investors can make while keeping its nonprofit in charge, converting its current business arm into a “public benefit company,” a type of for-profit business that needs to consider both making money and serving the public good.

“We want to be able to operate and get resources in such a way that we can make our services broadly available to all of humanity,” CEO Sam Altman stated in a letter published Monday.

The move places it at temporary odds with major shareholder Microsoft, whose $13.75 billion backing of the ChatGPT maker has helped bolster its market dominance in an increasingly crowded sector.

Microsoft is now reportedly holding out until it understands the finer points of the conversion, according to a report by Bloomberg on Monday.

Such a change “currently requires hundreds of billions of dollars,” Altman conceded in his letter, adding it “may eventually require trillions of dollars.”

The OpenAI founder acknowledged the pressure from a coalition of OpenAI alumni primarily based in California who wrote earlier in January detailing “deep concerns” over the company’s conversion plans. 

The coalition requested Attorney General Rob Bonta to ensure that OpenAI’s assets “are not illegally diverted for private gain.” 

The restructuring also seeks input from both California and Delaware attorneys general, who oversee the fair market valuation of the nonprofit’s stake in the new entity.

To this end, Altman claimed OpenAI would advance “in continued conversation” with the civic leaders, Microsoft, and its newly appointed nonprofit commissioners.

Yet for Altman, the change would likely limit his powers in the company.

By retaining nonprofit board control, Altman would be required to answer to an independent board, preventing unilateral or purely commercial decision-making.

Valued at roughly $300 billion after a $40 billion funding round in March, the company had been using an unusual model since 2019. The model capped investor profits at 100 times their investment.

The company is dealing with a lawsuit from co-founder Elon Musk, who opposes OpenAI’s shift toward becoming a standard company. Musk previously tried to buy OpenAI for $97.4 billion. The AI firm countersued last month.

“We want our nonprofit to be the largest and most effective nonprofit in history that will be focused on using AI to enable the highest-leverage outcomes for people,” Altman wrote.

Edited by Sebastian Sinclair