OpenAI's Defensive Measures Against Hostile Takeovers
Introduction
Elon Musk's recent unsuccessful attempt to acquire OpenAI has prompted the AI upstart to explore measures to prevent future takeovers.
Proposed Changes
OpenAI plans to restructure as a public benefit corporation (PBC) and grant special voting rights to its nonprofit directors. This would dilute Musk's or other investors' voting power.
Rationale
* Counter arguments against Musk's claim that OpenAI has shifted away from its charitable mission.
* Potential for board members to override other backers, including Microsoft and SoftBank.
Board's Power
* As a nonprofit, OpenAI currently has no shareholders or voting members, giving its board power to block acquisitions.
Restructuring Implications
* OpenAI would hold limited profit interests in its for-profit subsidiary.
* Investors like Microsoft would not hold equity but limited profit interests.
Poison Pill
* The special voting rights could act as a poison pill, allowing board members and existing shareholders to purchase additional shares at a discount.
Board Obligations
* Delaware law requires the board to review acquisition offers and explain rejections.
Nonprofit Status
* Hostile takeovers are rare in charitable organizations.
* Nonprofits can protect themselves by allocating special voting rights to board members under state laws.
Musk's Lawsuit and Rejection
* Musk originally co-founded OpenAI but dissociated himself due to disagreements.
* He donated $45 million to fund OpenAI, claiming it was conditional on its nonprofit status.
* OpenAI rejected Musk's $97.4 billion takeover offer as significantly below its estimated asset value.
* Japanese conglomerate SoftBank plans to invest $40 billion, valuing OpenAI at $260-$300 billion.
Conclusion
OpenAI's proposed changes aim to prevent potential takeovers and maintain control over its mission and assets. The board's special voting rights and poison pill provisions strengthen its position against unsolicited acquisitions.