OpenAI, the ChatGPT-maker, is reportedly contemplating relocating out of California due to escalating political scrutiny over its plans to transition into a for-profit entity.
Restructuring Efforts Faces Backlash Over Non-Profit Law Violations
The company, led by CEO Sam Altman, is facing resistance from California’s major philanthropies, nonprofits, and labor groups, reported The Wall Street Journal. These groups are concerned that OpenAI’s restructuring could violate the state’s charitable trust law.
The attorneys general of California and Delaware are investigating OpenAI’s proposed plan and have the authority to sue the company for possible violations of non-profit laws or require a settlement as a condition for the restructuring.
OpenAI’s investors have tied approximately $19 billion in funding to the creation of shares in the new for-profit company. If the restructuring does not occur, this could jeopardize the company’s future fundraising efforts and potential public listing. Investors could also withdraw their funding, undermining OpenAI's expensive plans to build massive data centers, develop custom chips, and remain at the forefront of AI research.
The company is actively pursuing backing for its restructuring strategy, enlisting advisers connected to California Gov. Gavin Newsom and committing $50 million to support nonprofit and community initiatives.
Notably, OpenAI told the publication that it has no immediate plans to exit California.
See Also: Sam Altman-Founded Project’s World Token Soars 47%: Here’s Why Its Moving – Benzinga
OpenAI Probes Elon Musk Links, Pressures Meta In Legal Fight
OpenAI’s proposed shift to a for-profit entity has been met with significant challenges and opposition. In July, the company accused a non-profit organization of violating state lobbying laws and possibly having connections to Tesla Inc. (NASDAQ:TSLA) CEO Elon Musk. This complaint was submitted to the California Fair Political Practices Commission.
In August, OpenAI pressed Meta Platforms, Inc. (NASDAQ:META) to produce documents related to Musk’s $97 billion takeover bid for the ChatGPT-parent, raising questions about the extent of Mark Zuckerberg‘s involvement in the legal battle.
Earlier in May, OpenAI’s plan to restructure into a $300 billion public-benefit corporation faced scrutiny as Delaware’s attorney general moved to hire an investment bank for an independent valuation. This move came as major investors clashed over equity distribution.
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