Written by: Zhao Ying
Source: Wallstreetcn
OpenAI and Microsoft have had an "amicable split," completing a year-long corporate restructuring and officially transforming into a Public Benefit Corporation (PBC), paving the way for a future IPO.
Microsoft, as OpenAI's largest shareholder, holds a 27% stake in the restructured company, valued at $135 billion, based on OpenAI's latest $500 billion valuation. On Tuesday, the two parties signed an agreement under which Microsoft will retain intellectual property rights to use OpenAI models and products until 2032. However, both companies now have greater freedom to collaborate and can each work with competitors.
At an all-hands meeting on Tuesday, OpenAI CEO Sam Altman said a public offering might happen in the future, but declined to disclose a specific timeline. In a public livestream, he mentioned that "considering our capital needs," an IPO is a possible option. OpenAI is expected to consume $115 billion by 2029, while this year's revenue is projected to be only $13 billion, resulting in a huge funding gap.
This restructuring diluted early investors' equity, as the nonprofit OpenAI Foundation received a 26% stake, valued at $130 billion. However, for investors, this opens the door to future liquidity exits. The SoftBank Group board has already approved its $22.5 billion investment plan, which is contingent on the completion of the restructuring.
IPO Path Clarified, Capital Needs Urgent
Altman revealed in the livestream that OpenAI has incurred $1.4 trillion in "financial obligations" due to commitments to use or develop 30 GW of data center capacity. However, the company's revenue this year is expected to be only $13 billion, leaving a huge gap compared to the projected $115 billion in expenditures by 2029 and server spending.
An IPO would provide the company with critical funding to cope with fierce competition from rivals such as Google and xAI. This restructuring converts early investors' investments into common equity and removes the cap on shareholder financial returns, clearing institutional obstacles for a potential IPO and greatly enhancing its appeal to public market investors.
Although an IPO would further dilute existing shareholders' equity, it is crucial for the company's continued operation. The restructuring has received tacit approval from the attorneys general of Delaware and California, who said Tuesday they would not object to the restructuring, citing OpenAI's commitment to the nonprofit's original mission of benefiting humanity.
As part of its commitment to the attorneys general, OpenAI agreed to keep its Safety and Security Committee independent from the company's board of directors. The committee, led by Zico Kolter, head of the Machine Learning Department at Carnegie Mellon University, has the authority to block the release of dangerous AI. The new company charter signed by Altman on Tuesday includes a clause stating that the board of directors may only consider the mission of benefiting humanity, not shareholder interests, when dealing with safety and security issues.
Core of the Restructuring: Transition to PBC, Removal of Return Caps
OpenAI's transformation from a nonprofit to a Public Benefit Corporation is a special corporate form under U.S. law that pursues both public interest and profit goals in its decision-making process. The most critical change in this restructuring is the conversion of each investor's investment into common equity and the removal of previous caps on potential financial returns.
The OpenAI Foundation now holds a 26% stake in the restructured company and maintains control over the for-profit company's board through the power to appoint and remove directors. The foundation stated that it will use the initial $25 billion in funding to support health research and address social risks posed by AI, such as AI-developed pandemics and job losses.
If OpenAI's valuation exceeds $5 trillion within 15 years—at least 10 times its current valuation—the foundation will also receive warrants to acquire additional shares. According to people involved in the restructuring discussions, at a $5 trillion valuation, the foundation could receive shares worth hundreds of billions of dollars. Currently, there is no company in the world with a market cap of $5 trillion, although Nvidia is approaching this level.
The End of a Century-Long Union: "Amicable Split" with Microsoft
The relationship between Microsoft and OpenAI underwent a significant change in this restructuring. Microsoft had previously invested about $13 billion in OpenAI and, under the old structure, enjoyed the right to receive profits preferentially—an advantage that no longer exists under the new agreement.
According to the new agreement, the relationship between the two parties has become more flexible:
-
Intellectual Property and Collaboration: Microsoft will retain perpetual rights to use OpenAI's intellectual property, applicable to all products developed by OpenAI before 2032 and non-public intellectual property developed internally before 2030. Even if OpenAI announces the achievement of Artificial General Intelligence (AGI) in the future, Microsoft can continue to use its models, but must comply with corresponding safety guardrails.
-
Open Collaboration: OpenAI has gained the freedom to collaborate with other cloud service providers (such as Oracle) outside of Microsoft, without needing Microsoft's permission. In reciprocity, Microsoft can also work more closely with OpenAI's competitors. Microsoft CEO Satya Nadella made it clear in an interview that he would be happy to see Anthropic or even Google's AI models on its Azure cloud platform. According to sources, Microsoft engineers are already working to directly integrate Anthropic's Claude model into Office software.
-
Hardware Exclusion: The agreement explicitly excludes the consumer hardware sector. This means that when OpenAI develops AI-driven consumer electronics, it does not need to share details with Microsoft, leaving room for independent exploration of new businesses.
In addition, OpenAI has committed to paying Microsoft $250 billion in rental fees for Azure cloud services over the coming period, securing long-term stable revenue for Microsoft.
Investors and Employees Reassured
This restructuring has reassured investors and current and former employees, as it opens the door to an IPO. The SoftBank Group board has approved its $22.5 billion investment, which is contingent on the completion of the restructuring. SoftBank's funding is part of a $41 billion financing round, which gives investors including Dragoneer Investment Group and Thrive Capital a combined 15% stake in the company, currently valued at $75 billion.
Thrive Capital, which invested $6.6 billion in OpenAI last fall, holds a 4% stake, valued at $20 billion. Current and former employees, as well as investors who purchased shares from them, collectively hold about 26% of the equity. In recent years, employees have sold about $10 billion worth of shares to other investors, reflecting strong market demand for these shares as the company's valuation has soared.
Janus Henderson portfolio manager Jonathan Cofsky manages two funds holding more than $800 million in Microsoft stock. He said, "This announcement removes a lot of uncertainty for Microsoft and its shareholders." He believes that Microsoft's continued exclusive rights to resell OpenAI models in the cloud are more important than having governance rights over the startup. "Bringing customers to Azure because of the OpenAI relationship will continue to benefit Microsoft well beyond 2032."
