OpenAI revealed a significant restructuring plan on Monday after being put under the microscope by California and Delaware’s attorneys general. The action converts its for-profit entity into a Public Benefit Corporation (PBC), yet retains control in the hands of its nonprofit board, a governance structure that tries to combine ethical control with financial freedom. The goal is to soothe regulatory worries while retaining deep-pocketed investors such as Microsoft and SoftBank.

IPO on the Horizon, or Not

Theoretically, there might be an IPO under any PBC arrangement, but OpenAI‘s unconventional setup raises questions. If the nonprofit owns the basic technology of the company, investors would see little control and value in public shares. Diamond in an interview said,

“My sense is there’s enormous intellectual property value at the OpenAI nonprofit level. But if the PBC doesn’t own and control the core IP, but are just licensed to use it, then what’s the IPO? That’s the challenge.”

OpenAI says it is not thinking about an IPO right now, but the financial burden of AI development might conspire to change its mind eventually.

Anytime shareholders may have an oversight role in corporate affairs, they ought to know that it would inherently be a limited one. In Loui’s view, shareholders might find their say curtailed in OpenAI, which is far from the public stock market’s expectation. Loui in an interview said,

“I think an IPO is much harder in this scenario.”

Pressure From Inside and Outside Increases

This corporate restructuring is more than a tale of governance, it’s a response to increasing legal, political, and investor pressure. Just last week, a bunch of former employees of OpenAI filed with regulators to stop the company’s conversion, claiming it departed from its original charitable mission. Meanwhile, Microsoft, the biggest investor in OpenAI, remains silent about whether it publicly supports the new plan. With billions at stake, that tech giant will surely fix its eagle eyes on every last detail of the amended structure and make sure that its interests are secured.

On the other hand, there’s Elon Musk, always one to speak out against what he perceives as injustice. The founder of Tesla and xAI, and a co-founder of OpenAI to boot, is leveraging the courts and his platform to take OpenAI to task for its for-profit shift. Musk filed a $97 billion bid to take over the nonprofit’s assets just recently and has focused his lawsuit on claims that OpenAI strayed from its nonprofit principles. While OpenAI CEO Sam Altman maintains that Musk’s lawsuit had no effect on the company’s actions, a recent refusal by a federal judge to dismiss some of Musk’s allegations might have pushed OpenAI into the realm of compromise.

Future of OpenAI

The new arrangement could provide enough predictability for regulators to accept it and for investors to have confidence in it. On the other hand, it could also embed the governance paradox into OpenAI even further. While the nonprofit still pulls the strings, the corporation must act as a business to survive and scale. It is precariously situated between the nonprofit’s mandates on one side and the business on the other, with the need to maintain some level of competitiveness in an AI gold rush on one side and transparency on the other.

So far, OpenAI is still a nonprofit-driven, PBC-organized, multi-billion-dollar AI giant, attempting to do well while doing good. If it is to sustain public trust and investor support, the next chapter of this reorganization needs to demonstrate that it can do both without coming apart at the end.