- in 2025, OpenAI’s for-profit entity recapitalized from a capped-profit entity with residuals flowing to the nonprofit to a traditional public benefit corporation with traditional equity
This is the egregious part. Before full for profit conversion it was worth $300B. Then after $850B.
A true fiduciary would set an auction and that would set the price for for profit valuation. And then all existing investors would keep the value of their positions, but would be diluted because capped profit is worth much less than unlimited profit and residuals.
But, they sold it to themselves for a bargain basement price. The nonprofit lost out on $300B or so. Maybe more.
It was not an arm’s length transaction. It was self-dealing.
I may not be fully understanding it, but if the value went from $300B to $850B because of the conversion, then you can’t claim that the additional value was stolen from the nonprofit. As long as the entity was unconverted, there was a limit to what the market would value it at. Is this off?
It’s quite an odd ruling given that OpenAI completed its for profit “conversion” last fall.
It seems the biggest value loss to the nonprofit was in this conversion, not in the initial for profit subsidiary creation giving investors capped profit shares.
Correct, Musk based his claims on the 2023 Microsoft deal.
The 2025 recapitalization was discussed at trial, but it was ancillary since all that changed was the existing for-profit changed from a capped-profit with weird cash flow mechanics to a traditional public benefit corp with ordinary equity.
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