OpenAI is considering granting new voting rights to its nonprofit board in a move that could help it fight an unsolicited takeover bid from Elon Musk, the Financial Times reported last night. Citing people familiar with the discussions, the FT wrote that CEO “Sam Altman and other board members are weighing a range of new governance mechanisms after OpenAI converts into a more conventional for-profit company.”
“Giving the nonprofit’s board outsized voting power would ensure it retain[s] control of the restructured company and [is] able to over-rule other investors including existing backers such as Microsoft and SoftBank,” the FT wrote. “While no firm decisions have been made, special voting rights would also ensure OpenAI can fight off hostile bids from outsiders such as Musk.”
We contacted OpenAI about the report and will update this article if it provides any comment.
Musk and a consortium of investors made a $97.4 billion offer for OpenAI last week. Altman responded that “OpenAI is not for sale” and described Musk as “a competitor who is not able to beat us in the market” and who has “total disregard for [OpenAI’s] mission.”
Altman also wrote a post on the social network now called X that said, “no thank you but we will buy twitter for $9.74 billion if you want.” The OpenAI board followed up with a vote unanimously rejecting Musk’s offer.
Poison pill another option
OpenAI was founded as a nonprofit in 2015 and created an additional “capped profit” entity in 2019. Any profit beyond the cap is returned to the nonprofit, OpenAI says.
That would change with OpenAI’s planned shift to a for-profit public benefit corporation this year. The nonprofit arm would retain shares in the for-profit arm and “pursue charitable initiatives in sectors such as health care, education, and science.”
Before making his offer, Musk asked a federal court to block OpenAI’s conversion from nonprofit to for-profit. The Financial Times article suggests that new voting rights for the nonprofit arm could address the concerns raised by Musk about the for-profit shift.
“Special voting rights could keep power in the hands of its nonprofit arm in future and so address the Tesla chief’s criticisms that Altman and OpenAI have moved away from their original mission of creating powerful AI for the benefit of humanity,” the FT wrote.
OpenAI could also consider a poison pill or a shareholder rights plan that would let shareholders “buy up additional shares at a discount in order to fend off hostile takeovers,” the FT article said. But it’s not clear whether this is a likely option, as the article said it’s just one that “could be considered by OpenAI’s board.”
In April 2022, Twitter’s board approved a poison pill to prevent a hostile takeover after Musk offered to buy Twitter for $43 billion. But Twitter’s board changed course 10 days later when it agreed to a $44 billion deal with Musk.