Sources informed Bloomberg that OpenAI has started preliminary talks with the California attorney general's office over changing its present nonprofit organization to a for-profit company model. Supported by Microsoft (MSFT, Financial), the $157 billion AI business will likely come under regulatory scrutiny over the value of its intellectual property, especially its flagship product, ChatGPT.
Additionally, Delaware's attorney general is also in correspondence with OpenAI while over the potential restructuring. Originally established as a nonprofit AI research facility in 2015, OpenAI established a capped for-profit company in 2019 in order to raise money for expensive AI model building. In a letter to Bloomberg, OpenAI's nonprofit board chairman, Bret Taylor, said "Any potential restructuring would ensure the nonprofit continues to exist and receives full value for its stake in the for-profit unit." Aimed at luring investors, the shift would keep a nonprofit arm with meaningful ownership in the new company, according to OpenAI strategy chief Jason Kwon.
The restructuring procedure will probably take a lot of time since asset value will determine regulatory permission. OpenAI has until 2026 to finish the shift under current financing terms; otherwise, the funding will turn into debt, according to The New York Times.
