OpenAI is negotiating with Microsoft to pave the way for a future IPO

OpenAI is renegotiating with Microsoft to clear the way for a future initial public offering (IPO).

According to a report by the Financial Times on Sunday, OpenAI and Microsoft are renegotiating the terms of their multi-billion dollar partnership to allow the ChatGPT maker to initiate a future IPO.

As OpenAI's largest investor, Microsoft has become a key stakeholder in the company's plans for corporate restructuring. This restructuring will further distance OpenAI from its original intention as a nonprofit organization "developing AI for the benefit of humanity."

The report noted that the core issue of the negotiations is how much equity Microsoft will receive in exchange for its investment of over $13 billion in OpenAI to date.

Microsoft Proposes to Give Up Some Equity in Exchange for OpenAI's New Technology

The negotiations also involve revising the contract terms drafted when Microsoft first invested $1 billion in OpenAI in 2019. This contract is currently valid until 2030 and covers Microsoft's access to OpenAI's intellectual property (such as models and products) and revenue sharing from product sales.

Three individuals directly familiar with the negotiations told the media that Microsoft has proposed to give up part of its equity in OpenAI's new profit-making business in exchange for access to new technologies developed after the 2030 deadline.

To attract investors, OpenAI is transforming into a "public benefit corporation." A person close to the company stated that this corporate model is a key requirement for investors and will allow OpenAI to offer equity to investors, ensuring that a future "IPO becomes possible." OpenAI's competitors, Anthropic and xAI, have also adopted similar models.

However, last week, OpenAI suspended its controversial transformation plan, retaining control of the company by the nonprofit organization.

Cooling Partnership: From Close Cooperation to Increasing Competition

According to several individuals directly familiar with the relationship between the two companies, the negotiations between OpenAI and Microsoft have become complicated due to the cooling of their relationship.

Although the two companies remain close partners—Microsoft has integrated OpenAI's technology into its software products while providing significant computing power for training AI models—OpenAI's ambitions have increased competition with its largest benefactor.

Previously, the startup had begun targeting enterprise customers with AI products while seeking partners like Japan's SoftBank and Larry Ellison's Oracle to establish its own "Stargate" project.

A senior Microsoft employee stated that OpenAI's attitude has sometimes appeared arrogant:

"OpenAI told Microsoft, 'Give us money and computing power, don't get in the way: let's enjoy the process together.' This naturally led to tensions." However, even in tense negotiations, Microsoft still hopes that OpenAI can successfully transform.

The Road to Transformation Still Faces Challenges

Reports add that even if an agreement is reached with Microsoft, OpenAI still faces more obstacles.

First, OpenAI must persuade the governments of California and Delaware to ensure that its proposals serve the public interest. Delaware Attorney General Kathy Jennings stated that she will review OpenAI's new plans to "ensure they align with OpenAI's charitable purpose and that the nonprofit entity retains appropriate control over the for-profit entity."

Additionally, OpenAI also needs to address criticisms from detractors who claim that OpenAI jeopardizes its mission by prioritizing profits over its mission.

As a co-founder of OpenAI, Musk has opposed the company's transition to a for-profit entity and even filed lawsuits to block this move.

OpenAI employee Page Hedley believes that the proposed changes undermine OpenAI's mission and could potentially redistribute "the immense wealth and power brought by AGI from the public back to OpenAI's investors."

Columbia Law School professor Dorothy Lund summarized:

"When you are a mission-driven company that needs investor funding, you are in a precarious position. You have to walk this line: to keep investors writing you big checks, you need to keep them satisfied."