Delaware AG hires an investment bank to review OpenAI

Delaware Attorney General Kathy Jennings is taking a proactive step in overseeing OpenAI’s ambitious $300 billion restructuring plan. Her office is hiring an investment bank to conduct an in-depth, independent review of the tech firm’s assets. 

The investment bank will provide financial expertise for the attorney general’s review. More specifically, it will analyze whether OpenAI’s nonprofit parent is getting fair value in the new structure, under which the company is moving its for-profit arm into a Public Benefit Corporation (PBC).

The decision comes after regulators, researchers, and former employees have grown increasingly concerned about OpenAI’s direction. With the company’s valuation soaring and investors’ interest rising, Delaware wants to ensure that the tech firm’s founding mission — to build AI that benefits humanity — isn’t forsaken in the quest for profit.

OpenAI is legally registered in Delaware, so Jennings can look at any structural changes that could impact its nonprofit status.

Critics push OpenAI to refocus on coders, not policy

OpenAI will maintain control of its nonprofit but turn the for-profit entity into a PBC. And that model holds the company legally accountable for making its profit-seeking motive contingent on creating social benefits.

The reorganization followed a deluge of criticism within the American artificial intelligence organization, academics, and even the billionaire Elon Musk. The plan received criticism, risking undermining the company’s mission in favor of profit motives.

By becoming a PBC, the tech firm hopes to bring in big money and be transparent and accountable to the public. The company also doesn’t want to miss the chains on its powerful AI systems, including ChatGPT and GPT-4.

OpenAI CFO Sarah Friar said this new structure could be a precursor to an IPO last month. But an IPO is not the short-term goal. She said the idea is to remain mission-aligned while being able to scale.

This structure is rare but not unheard of in tech. Other mission-focused companies like Patagonia and Kickstarter have also adopted the PBC model.

Officials and investors push back against OpenAI’s plans

OpenAI’s makeover is far from smooth. Both the Delaware and California attorneys general are actively investigating the changes.

While California’s AG office has remained publicly silent, sources reveal officials are examining whether the restructuring aligns with the tech company’s original charitable mission.

Elon Musk has filed a high-profile lawsuit. He was a co-founder of OpenAI but left the board in 2018. Now Musk accuses the company of departing from its original, nonprofit mission and being too closely affiliated with Microsoft.

Musk argues that OpenAI’s partnership with Microsoft consolidates too much influence over the future of artificial intelligence. His lawsuit filed in Washington warns that this dominance could stifle competition—including his own AI company, xAI.

On the business front, concerns are rising that legal battles or delays might unsettle investors. Sources say OpenAI aimed to raise up to $20 billion in new funding to broaden its product lineup, build AI hardware, and scale its computing infrastructure.

With the restructuring being reassessed, some of that money could be in jeopardy.

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