OpenAI announced on Monday a significant restructuring of its corporate framework following extensive discussions with the state attorneys general of Delaware and California, who have been closely watching the company’s efforts to reorganize its unique operating structure.
Presently, OpenAI operates under a nonprofit board, which oversees the company’s separate, for-profit branch. Under the newly revealed plan, this for-profit unit will transition into a Public Benefit Corporation (PBC), still overseen by the nonprofit entity. This arrangement aims to satisfy the expectations of regulators and major private investors who have collectively invested billions of dollars in OpenAI, anticipating substantial future returns.
Initially, the company had proposed a more radical restructuring effort last December, aiming to fully separate its for-profit arm from the nonprofit controlling board. That previous plan—designed to clear away certain nonprofit mandates, including a founder-mandated provision ensuring that artificial general intelligence benefits humanity broadly—has now been formally abandoned.
By converting to the PBC model, OpenAI may be better positioned to operate like a traditional, profit-oriented company; this includes the possibility of raising capital through a public share offering at some future point. Given OpenAI’s scale, significant operational expenses, and public visibility, an eventual IPO appears plausible, industry observers suggest.
However, observers and experts remain cautious about exactly how feasible an IPO truly is under the proposed arrangement. Santa Clara University corporate governance expert Stephen Diamond remarked on the uncertain nature of such a transition. Diamond explained that, although a nonprofit cannot itself go public, a Public Benefit Corporation can, raising the crucial question of what assets exactly the PBC would control. He pointed out that the nonprofit could retain ownership of vital intellectual property, licensing it to the PBC rather than transferring full ownership. Such ambiguity surrounding asset control potentially complicates any future IPO scenario significantly.
When asked about these issues, OpenAI spokespeople maintained that the nonprofit entity would retain ownership and control of key technologies. Additionally, they reiterated that while there are currently no plans for an IPO, the new structure would theoretically enable one if conditions warranted it.
Legal experts echoed concerns about the feasibility of an IPO. Rose Chan Loui, founding executive director for UCLA’s Law Program on Philanthropy and Nonprofits, underscored that shareholders purchasing stock in OpenAI under these conditions would inherently face much more limited influence over corporate decision-making compared to typical corporations. She concluded that such constraints would make an IPO significantly harder to execute.
This restructuring follows increasing regulatory scrutiny and growing internal tensions. Just last week, former OpenAI employees petitioned Delaware and California authorities to block the attempted corporate conversion, arguing it was incompatible with OpenAI’s original charitable mission and legal commitments. Both state attorneys general have said they are currently reviewing details of the new proposal.
OpenAI’s largest backers, notably Microsoft and Softbank, have been keenly watching developments. These investors have reportedly conditioned their multi-billion-dollar commitments to OpenAI upon a workable restructuring plan. Reports now indicate Microsoft remains cautious, particularly eager to ensure the new organization adequately protects their investment.
Meanwhile, billionaire Elon Musk—one of OpenAI’s original co-founders now competing directly against the company through his AI venture, xAI—has further complicated matters. Musk launched a $97 billion takeover offer, explicitly designed to inflate the perceived value of OpenAI’s nonprofit assets and complicate its transition to a for-profit entity. Musk has actively pursued legal action against OpenAI, accusing the firm of departing from its foundational nonprofit mission. Recent court developments, including the denial of several OpenAI motions to dismiss Musk’s fraud claims, may have contributed to OpenAI’s decision to adopt the new structure, despite CEO Sam Altman reportedly claiming Musk’s lawsuit played no role.
Musk’s counsel, Marc Toberoff, has indicated that OpenAI’s latest restructuring proposal would not deter Musk’s legal actions, signaling ongoing disputes ahead.
Ultimately, OpenAI’s restructuring approach introduces significant changes to its organizational DNA, yet brings about several unanswered questions regarding intellectual property ownership, shareholder rights, regulatory approval, and long-term financial prospects—all areas which will undoubtedly draw close industry and regulatory attention in the months ahead.
