OpenAI Retreats From For-Profit Shift, Nonprofit to Retain Control

OpenAI has reversed course on a major restructuring plan, announcing that its nonprofit parent will retain control over the company, limiting CEO Sam Altman's authority.

The decision follows legal challenges and criticism, including a lawsuit from co-founder Elon Musk, who accused OpenAI of abandoning its mission to develop artificial intelligence for the public good.

Altman confirmed in a blog post that OpenAI will remain under nonprofit oversight, stating, "That will not change."

In December, OpenAI proposed converting its for-profit arm into a public benefit corporation (PBC), which would have allowed it to raise more capital while balancing profit and social goals. Under that plan, the nonprofit would have become a major shareholder but would have ceded control.

On Monday, OpenAI said the nonprofit will continue to control the PBC and also become a major shareholder. The company will still pursue structural changes to its for-profit arm to attract more investment.

Chairman Bret Taylor said the decision came after discussions with civic leaders and the Attorneys General of California and Delaware. He noted the new structure remains "extremely close" to the current one.

Altman described the move as a compromise that satisfies investors, allowing OpenAI to continue fundraising. He said the company will work with Microsoft, regulators, and new nonprofit commissioners to finalise the plan.

He added that there will be no changes to existing investor relationships and that OpenAI will remove profit caps for investors. Altman also pointed out that PBCs are now common among AI firms, including Anthropic and Musk’s xAI.

However, critics say key questions remain. Page Hedley, OpenAI’s former policy and ethics adviser, questioned whether the company’s commercial goals would remain legally subordinate to its charitable mission.

Hedley also raised concerns about ownership of OpenAI’s technology and whether the board would be required to prioritise shareholder value under the PBC structure.

OpenAI has been seeking new funding to support its pursuit of artificial general intelligence. In March, it announced plans to raise up to USD 40 billion in a round led by SoftBank Group, valuing the company at USD 300 billion.

That funding round was contingent on OpenAI transitioning to for-profit status by the end of 2024. The company was thrust into the spotlight in Nov. 2023 when Altman was briefly ousted by the nonprofit board, only to be reinstated five days later.

Altman said OpenAI would still be eligible for SoftBank’s investment under the revised structure. SoftBank and Microsoft declined to comment.

The announcement also casts uncertainty over Musk’s lawsuit, which aimed to block OpenAI’s shift away from nonprofit control. A jury trial is scheduled for March 2026.

Earlier this year, a Musk-led group made an unsolicited USD 97.4 billion bid for OpenAI, which Altman rejected.

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• OpenAI will remain under nonprofit control, reversing plans to shift to a public benefit corporation

• CEO Sam Altman says the move satisfies investors and allows continued fundraising

• The decision follows criticism and a lawsuit from co-founder Elon Musk

Source: REUTERS