No equity for Altman, but plenty of questions

OPENAI

No equity for Altman, but plenty of questions

OpenAI has dropped its plan to become a for-profit company after talks with civic leaders and the attorneys general of California and Delaware, who oversee its nonprofit status.

Public backlash from figures Elon Musk and Meta may have played a role in the decision.

Now, OpenAI’s commercial arm will become a Public Benefit Corporation (PBC), joining other like Anthropic and xAI.

This replaces the old “capped-profit” mode, which limited investor returns to 100x.

Under the new setup, employees and investors will own standard shares, with no cap on gains, making it easier for OpenAI to raise more funding.

The non-profit board, which briefly removed CEO Sam Altman in 2023, will stay in charge.

It’ll appoint a new board for the PBC but still hold overall control.

The nonprofit itself will take an equity stake in the PBC that grows with the company’s value.

In brief:

• OpenAI will stay under nonprofit control but shift its commercial arm to a Public Benefit Corporation.

• The cap on investor returns is being scrapped to unlock more funding.

• The nonprofit will hold equity in the new PBC to fund AI initiatives for the public good.

Still not a normal company

Altman says the old structure worked with AGI, which looked like a one-horse race.

But with multiple players now in the mix, OpenAI needs flexibility to secure the vast funding it expects to need, potentially running into the trillions.

He also confirmed he still doesn’t hold any equity in the company.

California’s Department of Justice says it’s reviewing the updated plan. OpenAI says it will keep working with regulators and stakeholders to finalise the new structure.

From capped profits to public benefits, someone's PR team is sweating.