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TMTPOST -- OpenAI on Thursday suggested it is moving closer to its planned restructure as the ChatGPT maker reached a tentative deal with its largest investor Microsoft Corporation, a move seen as part of effort to facilitate the plan.
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OpenAI in May said its for-profit LLC, which has been under the nonprofit parent since 2019, will transition to a Public Benefit Corporation (PBC)–a purpose-driven company structure that has to consider the interests of both shareholders and the mission. Started as a nonprofit, OpenAI is and will continue to be overseen and controlled by that nonprofit, the startup stressed.
In a statement released on Thursday, OpenAI Chairman Bret Taylor said it will continue to be held by the nonprofit parent that guides its future, and will give the parent an equity stake of more than $100 billion, 「making it one of the most well-resourced philanthropic organizations in the world.」 Taylor said such recapitalization will allow OpenAI to continue to raise the capital required to accomplish its mission: ensuring artificial general intelligence (AGI) benefits all of humanity .
That stake, if come true, represents a roughly 20% share of OpenAI once it completes an over $4 billion secondary share sale at a $500 billion valuation. The startup last week was reported to be giving eligible current and former employees the opportunity to sell roughly $10.3 billion in stock, up from the $6 billion it was initially targeting.
「This structure reaffirms that our core mission remains ensuring AGI benefits all of humanity. Our PBC charter and governance will establish that safety decisions must always be guided by this mission,」 said Taylor, adding that it is working closely with the California and Delaware Attorneys General to establish its structure.
Taylor disclosed the OpenAI nonprofit has launched a call for applications for the first wave of a $50 million grant initiative to support nonprofit and community organizations in three areas: AI literacy and public understanding, community innovation, and economic opportunity. Taylor called the initiative a beginning as its recapitalization, if materialized, would unlock the ability to do much more.
In a joint statement on Thursday, OpenAI and Microsoft announced they had signed a non-binding memorandum of understanding (MOU) for the next phase of their partnership, without providing any details of the deal. 「We are actively working to finalize contractual terms in a definitive agreement,」 said two companies .
The MOU could set the stage for OpenAI』s restructure and eventually public listing. "Together, we remain focused on delivering the best AI tools for everyone, grounded in our shared commitment to safety," the companies said in their joint statement.
As of last October, Microsoft has invested $13.75 billion in OpenAI since 2019, including its share of the startup』s $6.6 billion fundraising in October. Such massive investment entitles Microsoft to a percentage of OpenAI』s profits.
The Wall Street Journal last year reported OpenAI has had agreed its profit distribution would go through four phases. At the first phase, OpenAI shall use its first $194 million in profits to pay back its first investors, and at the second phase, it shall split its next $17.3 billion in profits between its first invesors and Microsoft, with Microsoft receiving 75% of profits until it has recouped its $13 billion investment. At the third phase, OpenAI pay 49% of its profits to Microsoft until a predetermined cap is reached, and at the last phase, it will retain all profits once Microsoft has reached its predetermined return cap.
OpenAI and Microsoft are renegotiating the terms of their multibillion-dollar alliance in a move that could clear a path for the ChatGPT creator to go public, while preserving Microsoft』s access to cutting-edge AI technology, the Financial Times reported in May. At the heart of the talks is Microsoft』s investment in OpenAI and how much equity it will hold in the company』s restructured for-profit arm. According to the report, Microsoft is willing to give up part of its stake in exchange for extended rights to AI technologies developed beyond the current 2030 licensing cutoff. The partners are also reportedly reworking a broader commercial agreement that dates back to 2019, when Microsoft made its initial $1 billion bet on OpenAI.
Neither OpenAI nor Microsoft on Thursday disclosed disclose how much of OpenAI stake Microsoft would own after the restructuring, or whether Microsoft would retain exclusive access to OpenAI's latest models. The new deal may make sure Microsoft』s continued access to OpenAI』s technology even if the startup achieves AGI, which refers to humanlike AI capabilities that would have terminated their current partnership under existing terms.
