OpenAI lays groundwork for IPO… completes non-profit and for-profit coexistence model [Stocks+]

OpenAI completes restructuring

Nonprofit foundation secures controlling stake in for-profit unit

MS, stake at 27%… stock price up 1.98%

OpenAI has completed a governance structure in which its parent nonprofit foundation controls OpenAI's for-profit unit.

On the 28th (local time), OpenAI announced, "The nonprofit parent has finalized a new structure that governs the for-profit business unit." The nonprofit parent has been newly named the 'OpenAI Foundation' and holds approximately $130 billion worth of equity in the for-profit corporation 'OpenAI Group PBC (Public Benefit Corporation).'

Thus, OpenAI has completed a coexistence model of nonprofit and for-profit and laid the foundation for future fundraising, including an initial public offering (IPO).

Nonprofit 26%, employees·investors 47%, MS 27% stake holdings

Under the new structure, the OpenAI Foundation holds 26% of the for-profit unit, employees, former employees and early investors hold 47%, and Microsoft (MS) holds about 27%. MS has been a key partner, having invested more than $13 billion in OpenAI since 2019.

With this restructuring, Microsoft's stake is valued at $135 billion, somewhat lower than the previous 32.5% level.

OpenAI said on its official blog, "As the company grows, the nonprofit foundation's stake value will increase, and through this the foundation will be able to expand social contribution and charitable activities." Meanwhile, MS's stock closed up 1.98% on the New York Stock Exchange that day.

OpenAI was founded in 2015 as a nonprofit research institute but has rapidly risen in recent years to become a leading company in the commercial AI market. The company's current valuation is about $500 billion.

OpenAI had announced plans to fully convert to a for-profit company in 2024, but after intense criticism from civic groups, former employees and policy leaders, the nonprofit side changed its policy in May this year to retain control over the for-profit unit. The OpenAI Foundation said that day, "We plan to commit $250 billion to medical innovation and strengthening AI resilience." AI resilience refers to the ability of AI systems to continue operating and recover in response to crises, attacks, errors and social shocks.

MS's right of first negotiation as computing supplier removed

MS said under the agreement that OpenAI would purchase an additional $250 billion of Azure cloud services. However, MS will no longer hold the right of first negotiation as a computing supplier. This means that OpenAI will be able to freely sign contracts with other cloud companies in the future.

Until now, OpenAI has performed most of the computation and data storage through MS's cloud service 'Azure' to train and operate large language models. Past contracts included a clause that if OpenAI sought a new computing infrastructure provider, it must first negotiate with MS.

But with this clause removed, OpenAI can independently partner with Amazon Web Services (AWS), Google Cloud and others as needed in the future. In other words, the relationship between the two companies has shifted from an exclusive partnership to an open collaborative structure.

Industry observers believe Microsoft may not have originally favored such terms. Over the past several years, MS has been OpenAI's largest investor and core technology partner, providing most of the cloud infrastructure that runs OpenAI's AI models through the 'Azure' platform.

Therefore, the possibility that OpenAI may partner with competing cloud providers such as AWS or Google Cloud in the future could lead to a reduction in MS's business influence, analysts say. Nonetheless, the dominant interpretation is that MS's acceptance of this change reflects a strategic choice to maintain a long-term cooperative relationship with OpenAI.

In a situation where competition for leadership in the AI ecosystem is intensifying, it appears MS concluded it is more practical to remain a 'partner it can cooperate with' rather than provoke conflict to keep an exclusive relationship with OpenAI.

The two companies also unveiled new terms of the partnership in this announcement. MS explained, "If OpenAI claims to have achieved 'AGI', i.e., human-level intelligence, that judgment must be verified by an independent panel of experts." The revenue-sharing agreement between the two companies will remain in place until this panel officially confirms AGI has been reached. In addition, MS has secured the right to develop AGI independently or with third parties, and OpenAI is also able to co-develop products with other companies.

IP rights extended until 2032

OpenAI remains a key partner of MS's 'frontier model.' MS has extended intellectual property rights to OpenAI's models and products until 2032, and this applies to models developed after AGI as well. However, OpenAI's consumer hardware products are excluded from MS's IP rights.

In a statement, MS said, "In this new chapter of the partnership, the two companies are in a stronger position than ever. They will solve real-world problems and create new opportunities for every individual and company."

New York=Park Shin-young, correspondent nyusos@hankyung.com