OpenAI and Microsoft announced a non binding memorandum of understanding that lays out a revised partnership to enable OpenAI to convert its for profit arm into a public benefit corporation. The announcement frames the change as the next phase of a long standing alliance while also making clear more formal contracts and regulator sign off are still required.
What has changed
Under the memorandum OpenAI’s nonprofit will continue to exist and retain governance control over the new public benefit company. OpenAI says the nonprofit will also receive a large equity stake in the new company that the parties value at over one hundred billion dollars. The agreement is described as non binding and the companies say they are working to convert the outline into definitive contractual terms.
The memo also signals a loosening of earlier exclusivity tied to a single cloud partner. OpenAI has been expanding its compute relationships with other providers while Microsoft remains a major investor and cloud customer. Recent reporting notes that OpenAI has arranged new large scale compute contracts which diversify its infrastructure suppliers.
OpenAI and Microsoft said they will continue to engage with the attorneys general in California and Delaware as part of the regulatory process. That step matters because the proposed change affects the control relationship between a nonprofit and a for profit entity and those regulators will review whether the conversion aligns with state nonprofit law and public interest obligations.
What comes next
The memorandum does not close the deal. The two parties termed the document as an intent and they will negotiate a final document. The plan will have to be reviewed by state regulators and potentially other oversight agencies before it is allowed to become effective. The transition process is likely to have legal and policy review because openAI has already been litigated and questioned about its governance and mission.
To investors and customers, the transition would redefine who is able to invest in OpenAI and how the company would balance profit and its claimed objectives of benefit to the people. In the case of OpenAI the relocation can open up to a new capital and eventually to a public listing assuming the governance, regulatory and legal challenges are overcome. Microsoft has indicated that it would like to be able to continue using the OpenAI technology and OpenAI is looking to expand its cloud and commercial engagements.