MW OpenAI to seek capital as a public benefit corporation in the vein of Patagonia

By Steve Gelsi

Public benefit corporations, or B-Corps, are certified to be more focused on social impact and sustainability

OpenAI, the massive artificial intelligence startup valued at about $157 billion, plans to set itself up as a public benefit corporation, or B-Corp., with a focus on social impact.

The structure points the way toward OpenAI becoming a publicly-traded company because it said it plans to convert ownership stakes in its business into ordinary shares, or common shares of stock, although it did not provide a timeline.

"We once again need to raise more capital than we'd imagined," the organization said in a blog post late Thursday. "Investors want to back us but, at this scale of capital, we need conventional equity and less structural bespokeness."

OpenAI's need for more capital comes not long after the San Francisco-based software company's October announcement of $6.6 billion in funding at a $157 billion total valuation for the business.

At last check, ChatGPT, a popular AI chatbot developed by OpenAI, is used by more than 300 million people a week, mostly for free.

Market watchers have said an initial public offering from OpenAI seems unlikely in 2025 given that it's been able to raise billions of dollars in backing in private markets, including an investment from Microsoft Corp. $(MSFT)$.

The California-based organization said it plans to change its existing for-profit entity into a Delaware Public Benefit Corporation, or B-Corp, which is a similar structure to sustainability-focused businesses such as outdoor gear maker Patagonia and soap brand Seventh Generation.

Ben & Jerry's also has the same structure as an operating unit within Unilever (UK:ULVR).

OpenAI will formally redefine its for-profit business into the PBC aimed at benefitting the public, the group said Thursday.

"The non-profit's significant interest in the existing for-profit would take the form of shares in the PBC at a fair valuation determined by independent financial advisors," OpenAI said. "This will multiply the resources that our donors gave manyfold.".

The company defined a PBC as one that balances shareholder interests, stakeholder interests, and a public benefit interest in its decision making.

The company will also maintain its non-profit unit as a charity for the education, science and health-care sectors.

"The PBC will run and control OpenAI's operations and business, while the non-profit will hire a leadership team and staff to pursue charitable initiatives," the company said.

The public benefit corporation remains a relatively new form of corporate structure. The first publicly-traded PBC was Laureate Education $(LAUR)$ in 2017.

Bill Peters contributed.

-Steve Gelsi

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December 27, 2024 12:59 ET (17:59 GMT)

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