OpenAI is changing course on its corporate restructuring, but not in the simple way investors or future public-market buyers might have expected. The company said on Monday that its for-profit arm will become a public benefit corporation, while OpenAI's nonprofit will remain in control.
The plan follows conversations with Delaware's and California's attorneys general, both of whom were closely watching the company's effort to move beyond its unusual corporate setup. It also arrives as OpenAI faces pressure from former employees, major private investors and Elon Musk.
What OpenAI is now proposing
OpenAI currently operates with a nonprofit board governing its for-profit operations. Under the new plan, that for-profit business would become a public benefit corporation, often shortened to PBC. The important point is that the nonprofit would still control it.
That is a sharp change from the direction OpenAI outlined last December. At that time, the company described a path that would have let its for-profit arm move out from under the nonprofit board's control. That board is tied to obligations including a charter clause focused on making sure artificial general intelligence benefits all humanity.
The Monday plan leaves the nonprofit at the center. OpenAI intends for the nonprofit to control the PBC and also be a large shareholder in it. The proposal also gives the company a more conventional capital structure, with employees, investors and the nonprofit holding equity directly.
That structure could help answer some concerns. Regulators have been reviewing the company's attempted restructuring, and investors have put billions into OpenAI with the expectation of a return someday. But the same structure also creates a difficult question: what exactly would outside shareholders own and influence?
Why a future IPO would be complicated
A public benefit corporation can go public, while a nonprofit cannot. That means OpenAI's new plan does not rule out an IPO in theory. OpenAI spokesperson Steve Sharpe told TechCrunch by email that the company has no intention of going public at this time, but that an IPO would be "theoretically" possible under the proposed structure.
Stephen Diamond, a corporate governance professor at Santa Clara University, told TechCrunch that the path to OpenAI becoming a public company under the new proposal is very narrow. The central issue is ownership and control of OpenAI's most important assets.
"My sense is there's enormous intellectual property value at the OpenAI nonprofit level," said Diamond in an interview. "But if the PBC doesn't own and control the core IP, but are just licensed to use it, then what's the IPO? That's the challenge."
Diamond also noted that the full details of the plan are not yet known and that it remains unclear whether the transition will succeed. Sharpe said OpenAI's nonprofit will continue to control the company's technology.
That matters because public investors usually expect stock to come with some influence over the company they are buying into. Rose Chan Loui, the founding executive director for UCLA's Law Program on Philanthropy and Nonprofits, told TechCrunch that if the nonprofit controls the critical technology, shareholders would have limited say over corporate decisions.
"I think an IPO is much harder in this scenario," said Loui in an interview with TechCrunch.
The pressure behind the new plan
OpenAI's restructuring has been under scrutiny from several directions. Just last week, a group of former OpenAI employees asked California's and Delaware's attorneys general to block the startup's conversion. They argued that the move conflicted with OpenAI's charitable roots.
Both attorneys general told TechCrunch that they are reviewing OpenAI's new plan. That review is part of the broader pressure surrounding any attempt to change the company's structure while preserving its nonprofit commitments.
OpenAI also needs support from major private investors. The source article names Microsoft and SoftBank among the company's largest private investors. Their multibillion-dollar investments reportedly depend on OpenAI getting some kind of restructuring completed.
Microsoft has not yet approved the new corporate structure, Bloomberg reported on Monday. The cloud provider wants to make sure the structure adequately protects its multibillion-dollar investment in OpenAI. It is unclear whether other key stakeholders have approved the deal.
The new plan may therefore be designed to satisfy multiple audiences at once:
- regulators watching whether the nonprofit mission remains protected;
- investors seeking a clearer equity structure;
- employees who would hold equity directly;
- the nonprofit, which would stay in control and remain a large shareholder.
Those goals do not all point in the same direction. A structure that preserves nonprofit control may be more acceptable to regulators and mission-focused critics. The same structure may make a future IPO harder to explain to investors who expect normal shareholder power.
How Musk's challenge fits in
No outside figure has applied more pressure to OpenAI's restructuring than Elon Musk, according to the source article. Musk co-founded OpenAI and now competes with it through his AI startup xAI.
He submitted a $97 billion takeover bid aimed at raising the price of OpenAI's nonprofit assets and slowing the ChatGPT maker's for-profit transition. Musk has also made the restructuring a central issue in his lawsuit against OpenAI and Microsoft.
At the core of that lawsuit is the claim that OpenAI abandoned its nonprofit mission to develop AGI and distribute it broadly. Last week, a federal judge denied several of OpenAI's motions to dismiss claims in Musk's suit. Diamond said that was a modest win for Musk and may have influenced OpenAI's change in direction.
Altman reportedly denied in a Monday press briefing that the lawsuit affected OpenAI's plans. Marc Toberoff, Musk's lead counsel in the case, told TechCrunch that the new restructuring plan "changes nothing," suggesting the case is unlikely to disappear quickly.
What remains unresolved
OpenAI's revised restructuring plan answers one major question: the nonprofit is not stepping away from control. The for-profit arm may become a PBC, but the nonprofit remains the controlling force and will continue to control the company's technology.
That choice may help OpenAI maintain a link to its founding mission while still moving toward a clearer capital structure. It may also keep regulators from objecting as strongly as they might have under a cleaner break from nonprofit oversight.
But the plan leaves the company's corporate future unsettled. Investors may get direct equity, yet their influence could be limited. A public offering may remain theoretically possible, yet harder to sell if the PBC does not own or control the core technology. And the legal and regulatory pressure around the restructuring has not gone away.
OpenAI's next challenge is not simply choosing a corporate form. It is making that form credible to regulators, investors, employees and critics while keeping the nonprofit mission at the center of the company that controls the technology.