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For-profit arm still restructuring for more

capital-raising

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OpenAI to remain under nonprofit parent's control

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For-profit push had raised concerns about asset allocation

for

nonprofit arm

May 5 (Reuters) - OpenAI said on Monday it would remain

under the control of its nonprofit parent, while pushing ahead

with plans to change the structure of its for-profit arm to

allow more capital-raising to keep pace in the

artificial-intelligence race.

The announcement follows a storm of criticism and legal

challenges, including a high-profile lawsuit filed by rival Elon

Musk, who has accused the company of straying from its founding

mission to develop AI for the benefit of humanity.

"We made the decision for the nonprofit to stay in control

after hearing from civic leaders and having discussions with the

offices of the Attorneys General of California and Delaware,"

the startup said in a blog post. "We look forward to advancing

the details of this plan in continued conversation with them,

Microsoft ( MSFT ), and our newly appointed nonprofit commissioners."

The company had outlined plans in December to revamp its

structure to become a public benefit corporation, saying that

would help it to "raise more capital than we'd imagined," and

remove the restrictions imposed on the startup by its current

nonprofit parent. On Monday, OpenAI said the nonprofit parent

will control the public benefit corporation and become a big

shareholder in it.

The move had raised concerns about whether OpenAI would

allocate its assets to the nonprofit arm fairly, and how the

company would strike a balance between making a profit and

generating social and public good as it develops AI.

The startup has been looking to make changes to attract

further investment, as the expensive pursuit of artificial

general intelligence, or AI that surpasses human intelligence,

heats up.

It said in March it would raise up to $40 billion in a new

funding round led by SoftBank Group ( SFTBF ), at a $300 billion

valuation. The round was contingent on the AI firm transitioning

to for-profit by the end of the year.

OpenAI's structure drew attention in November 2023 during one of

the biggest boardroom dramas in Silicon Valley, where members of

the nonprofit board ousted OpenAI co-founder and CEO Sam Altman

over a breakdown in communication and loss of trust. He was

reinstated after five days, following an outpouring of support

from employees and investors.