What OpenAI’s Governance Reversal Means

OpenAI’s decision on Monday to change course on its corporate restructuring looks to be a smart business choice. OpenAI has avoided a possible protracted conflict with Delaware—whose attorney general oversees nonprofits registered in the state, like OpenAI and implied she had something to do with the about-face. 

And OpenAI contends the changes it is still making—converting the for-profit arm into a public benefit corporation and switching its shareholders’ profit-sharing units to a more traditional corporate stock—will satisfy a commitment made to investors such as Thrive Capital and SoftBank last fall.

OpenAI has also said it will remove caps on their potential investment returns. Such caps were a key pillar of the creation of a for-profit subsidiary back in 2019. Uncapping financial returns also reopens the possibility of OpenAI going public, which the company’s private investors also generally want.

At least one OpenAI investor seemed satisfied with the outcome and told us that it’s the “best outcome given the parameters that exist right now,” especially because of the scrutiny and pressure that came with Elon Musk’s lawsuit opposing the restructuring. The investor added that, even as they await a potential IPO in OpenAI’s future, large secondaries, which OpenAI has already done, could be another way for stakeholders to cash out.