OpenAI’s path to a potential IPO may have just got a little clearer.
The AI company
said last week that it has reached a preliminary agreement with major investor
Microsoft that could allow the startup to restructure and, eventually, go public. Both companies signed a non-binding memorandum outlining “the next phase” of their relationship, with a definitive agreement expected in the coming months.
The announcement was light on details; financial small print was not disclosed, and the companies said they are still finalizing contractual terms. But the deal appears to address the structural and competitive friction that has complicated the relationship between OpenAI and its largest investor, paving the way for the $500 billion startup to convert its for-profit arm
into a public benefit corporation (PBC).
OpenAI’s corporate structure is unusual. Originally founded as a nonprofit, it established a capped-profit arm in 2019, which allowed for large investments such as Microsoft’s. The company has been trying to restructure its profit-focused entity into a more conventional corporate model to allow it to raise additional capital, while leaving the nonprofit parent in control of the startup’s operations. A conversion to a more traditional structure, such as a Public Benefit Corporation, could allow the company to combine its public mission objectives with profit generation and possibly go public in the future.
Altman is well aware that speculators want to see OpenAI float on the stock exchange. He told
CNBC last month he had “very conflicted” feelings on a potential IPO, explaining: “Whenever we do go public, if we ever go public, I think there will be tremendous upside left in front of the company, but I get why people would love for us to be public or sooner. And I’m sure people also get the reality of like we’re still in a crazy position and it would be very hard for us to be public given just all of the realities of that.”
–Beatrice Nolan 