Sam Altman’s $10B OpenAI Windfall a Snub to Co-Founder Elon Musk
OpenAI plans to restructure its core business into a for-profit benefit corporation that the board will no longer control. | Credit: Justin Sullivan /Getty Images.
Key Takeaways
- OpenAI is reportedly planning a new ownership structure that sidelines the non-profit boar
- The restructuring could see CEO Sam Altman receive a $10 billion payday.
- The deal could have consequences for Elon Musk’s legal battle with OpenAI and its CEO.
- Musk has sued OpenAI and Altman for allegedly breaching the terms of its founding agreement.
To critics of OpenAI’s trajectory in the last decade, the recent news that it will restructure as a for-profit benefit corporation hammers the final nail in the coffin of its idealistic founding principles. Those critics include Elon Musk, whose $45 million investment helped kickstart the venture in 2015 but who has since relinquished his seat on the board and is now suing OpenAI for breach of contract.
But what does the news that OpenAI is considering giving its CEO a $10 billion stake in the company mean for Musk’s claim that Altman “conned” him?
Elon Musk vs OpenAI
In two separate lawsuits filed in March and August of this year, Musk has accused OpenAI and its leadership, specifically President Greg Brockman and CEO Sam Altman, of violating the terms of their founding agreement.
“Altman assured Musk that the non-profit structure guaranteed neutrality and a focus on safety and openness for the benefit of humanity, not shareholder value,” the second complaint states. “But as it turns out, this was all hot-air philanthropy—the hook for Altman’s long con.”
While it’s true that OpenAI transitioned to a for-profit model in 2019, it is still nominally governed by a non-profit board that has the power to fire and appoint company executives.
However, according to the latest plans, even that lingering reminder of its non-profit inception could soon disappear.
OpenAI’s Planned Restructuring
As first reported by Reuters on Thursday, Sept 25, OpenAI plans to restructure its core business into a for-profit benefit corporation that the non-profit board will no longer control.
The OpenAI non-profit will continue to exist and own a minority stake in the company. Other stakeholders, including Altman himself, will also own shares.
Pursuing a more traditional corporate structure could allow investors like Microsoft to receive OpenAI equity. It may also make it easier for the company to raise additional capital as it seeks new funding at a $150 billion valuation.
Impact on Musk’s Lawsuit
The proposed new structure is a snub for Mr. Musk, who may be left out of any equity agreement even though he essentially bankrolled OpenAI in its early days. But does that mean his legal standing is any stronger?
OpenAI has always contested that Musk’s allusion to a “founding agreement” doesn’t refer to a specific contract between OpenAI’s founding parties.
His most recent lawsuit argues that the “relationship, surrounding circumstances, and intentional course of conduct” between Musk, Altman, and OpenAI “resulted in a valid, enforceable, and binding implied-in-fact contract.” However, the lack of any signed documents significantly undermines his case.
One factor that could sway things is Altman’s potential equity windfall once OpenAI is restructured.
Sam Altman’s $10 Billion Payday
The controversial CEO has gone to great lengths to cultivate a certain public image and likes to depict his interest in AI as altruistic rather than focused on making money. But that argument will be much harder to make if he is handed shares worth billions of dollars.
According to Bloomberg , OpenAI is considering giving Altman a 7% equity stake in the company that could be worth more than $10 billion
This has consequences for Musk’s second lawsuit, which alleges violations of federal racketeering laws. If Altman walks away from the latest restructuring a billion dollars richer, Musk’s lawyers can expect to depict it as further evidence of the alleged injustice.
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