OpenAI completes for-profit restructuring and inks Microsoft agreement

Tech firm OpenAI announced on Tuesday that it had completed its restructuring plan, clearing the way for it to become a for-profit business.

Going forward, the firm’s non-profit wing will be called the OpenAI Foundation, and it will hold an equity stake worth about $130 billion (€110bn) in its for-profit arm.

The company also said it has signed a new agreement with its long-time backer Microsoft that gives the software giant a roughly 27% stake in OpenAI's new for-profit corporation — worth around $135bn (€116bn).

In response to the news, Microsoft shares rose as much as 4% in early trading in New York, sending the firm’s market capitalisation past the $4 trillion mark.

“The more OpenAI succeeds as a company, the more the non-profit’s equity stake will be worth, which the non-profit will use to fund its philanthropic work,” said OpenAI in a blog post on Tuesday.

It added: “This recapitalisation maintains the strongest representation of mission-focused governance in the industry today.”

The breakthrough comes after nearly a year of discussions between OpenAI and regulators in Delaware, where OpenAI is incorporated, and California, where the company is headquartered.

Delaware Attorney General Kathy Jennings said in a statement she did not object to the proposal, while California Attorney General Rob Bonta’s office didn’t immediately respond to a request for comment.

Changes to the Microsoft agreement

Microsoft, which first invested in OpenAI in 2019, said it will retain intellectual property rights to the firm’s models and products through to 2032. These rights will in part pertain to AGI or “artificial general intelligence” models, meaning systems that outperform humans at most economically valuable work.

OpenAI had previously said its own board will decide when AGI is reached, effectively ending its Microsoft partnership. However, it has now clarified that once AGI is declared by OpenAI, that declaration will have to be verified by an independent expert panel.

Microsoft will retain its rights to OpenAI’s research either until AGI is confirmed by the panel or by 2030, depending on which comes first.

The agreement could be a precursor to an Initial Public Offering, allowing OpenAI to sell shares on a public stock exchange.