Elon Musk recently attempted an unsolicited acquisition of Openai, which was rejected by CEO Sam Altman and Openai’s nonprofit committee.
The creator of ChatGpt is reportedly wanting to ensure that future coups from the world’s wealthiest man or other investors are not successful.
According to a Financial Times reportthe debated changes give Openai’s existing non-profit supervision a special voting right to maintain power over Openai even if artificial intelligence organizations are restructured into commercial enterprises known as public benefits organizations. You can do it.
By focusing such power on Openai’s nonprofit organizations, AI startups were able to counter Musk’s argument that it had left its original charity mission. It also allows board members to potentially overturn other supporters of for-profit companies, such as Microsoft (MSFT) and SoftBank.
All of that will be piloted by Openai’s board members and Altman. These are all defendants in a lawsuit from Musk that attempts to block Openai from converting to a for-profit business.
“There are strategic decisions that are made to protect nonprofits from hostile takeovers and coups,” nonprofit law expert Ellis Carter wrote to her Charitable lawyer Blog. But Carter explained that he “can’t really criticize the nonprofit” but must be done with caution.
He added that “governance design is important” because non-profit companies don’t have stock or formal ownership.
For now, Openai’s board of directors is authorized to dodge the acquisition as it is a nonprofit organization with no shareholders or voting members. However, Professor of Law at the University of California, Los Angeles Rose Chan Rui Said appears to be focusing on strengthening hostile takeovers that could come in the conversion of for-profit benefits into utility companies.
Chang Louis suspects that Openai will give board members a special class of voting stocks in a reconstructed for-profit corporation with better rights than other shareholders. At the very least, their vote could overturn the move to takeover by private investors, including Microsoft, Openai’s biggest investor.
Beyond that, she said it is unclear how specific the voting rights are. For example, they could decline attempts to acquire, or limit them to as extensively as all the comprehensive rights currently held by the nonprofit committee.
“We need more details,” said Zhang Louis.
Openai did not respond to the request for clarification.
Currently, investors like Microsoft are not Openai’s stockholders, and the profits of Openai’s for-profit subsidiary are limited. Once Openai makes a profit, Microsoft is entitled to 75% of its profit until it recovers its $13 billion major investment. The other 25% of profit goes to employees and initial investors up to a specific profit cap.
Once the Microsoft principal is repaid, he is entitled to 50% of his profit until he reaches the $92 billion profit cap.
Openai I said I want to convert my nonprofit parents to Delaware Public Benefit Corporation (PBC), which issues common stock in stock.
In theory, PBC could provide stock profits to new investors and convert the limited profits of existing investors into stock profits.
Chang Louis has a special voting right poison This allows the board and existing shareholders (other than any activist investor) to purchase additional shares at a significant discount.
Openai has not been fully inoculated from external bids despite the power of the board. Legally, the Board is tasked with carrying out its mission of “ensure that artificial general information… benefits all humanity.” And its website says that it could mean putting resources behind similarly oriented projects.
“Before we do, if a value-oriented, safety-conscious project approaches building AGI, we promise to stop competition with this project and start supporting it,” said Charity. The charter of situation.
Under Delaware law, where Openai is registered, the nonprofit committee is obligated to seriously consider acquisition offers and explain why they reject them.
Charities are not usually the target of hostile acquisitions, not the type Musk has in particular in mind, but an unsolicited $97.4 billion bid for Openai’s estimated $157 billion intellectual property and other assets. .
Instead, nonprofits face more generally internal power struggles. attack The Environmental Group was launched in 2003 by advocates for anti-relocation.
However, nonprofits can actually protect members from acquisitions by assigning special voting rights to board members, as long as they comply with the laws of the state in which the charity is organized. I wrote it In a blog post.
Musk and Altman originally co-founded Openai as a nonprofit in 2015, but Musk left the AI company over differences of opinion with the venture on how to move forward, eventually establishing a competing AI company called Xai. did.
The lawsuit seeking to prevent Openai’s conversion to a for-profit enterprise over the initial $45 million donation to fund Musk startups is argued that Openai remains a non-profit organization. It’s there.
Openai says it needs to be converted into a for-profit structure to attract new capital.
The $97 billion mask acquisition offer fell significantly below the current valuation of Openai’s assets. Japanese conglomerate SoftBank is planning a new $40 billion investment.260 billion To $300 billionaccording to various media reports.
Altman published his rejection in a post on X, the social media platform previously known as Twitter, which Musk purchased for $44 billion in 2022.
Altman writes: “Thank you, but I’ll buy Twitter for $9.74 billion if necessary.”
Openai also stated in another court document that Musk’s bid against Openai contradicts his claim in his current lawsuit that Openai’s assets should not be used for beneficial benefits. Ta.
“Musk’s purchase bids cannot be in harmony with Charitable Trust claims [he] He’s moving forward in this court.”
Openai’s board officially rejected the mask bid on February 14th. .
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