Openai’s board has been locked in complex negotiations to become a for-profit company, struggling to set a price for Microsoft’s stake in the startup while holding talks to value its newly formed philanthropic arm at $30 billion.

The maker of ChatGPT, which is overseen by its non-profit board, has been discussing a restructuring since September that would split the startup in two. Its philanthropic arm, building on Openai’s original mission of “benefiting humanity,” will take a stake in the newly formed public benefits corporation (PBC).

One hurdle to the conversion is determining how much stock the startup’s largest backer, Microsoft, will hold in PBC, according to people with knowledge of the talks. Other considerations, such as how much equity CEO Sam Allman will be given in the new company, should be ironed out.

According to three people familiar with the negotiations, the philanthropic arm could be worth around $30 billion, but a final price has not yet been determined. The majority of this value will be realized in the form of equity in PBC, adding one person, with the remainder paid in cash.

“This is a new phenomenon where non-profits have stakes in the profit,” said Carla Dennis, CEO of tax advisory firm KDA, who added that such transactions were paid for in cash.

The restructuring will create “one of the best nonprofits in history,” according to Openai. But some, including Elon Musk, argue that the nonprofit’s true value is much higher, given its current control of Openai, which is worth $157 billion.

Switch is designed to allow Openai to raise tens of billions of dollars from investors, which the startup views as crucial to developing cutting-edge AI models before competitors. But it’s also a big break from Openai as a non-profit and highly complex move for which there is little legal precedent.

Openai agreed to a two-year time limit to complete the conversion with investors as part of its latest funding round in September. If the change is not completed by the deadline, investors could return some of the $6.6 billion they put into the company.

Of the current stakeholders, Microsoft’s relationship with Openai is the most sensitive.

Finding out how much stock Microsoft can get without attracting antitrust attention is another important part of the hold for the switch to PBC, said a person close to Openai.

Openai and Microsoft declined to comment.

On Tuesday, Microsoft announced that it would change the structure of the Openai deal to enable the startup to launch Rivals’ cloud computing services.

The move means Microsoft will relinquish its position as Openai’s exclusive cloud provider but reserves the right of first refusal. Microsoft said several “key elements” of its partnership with Openai will remain in place until the end of 2030, when their current deal concludes, including revenue-sharing arrangements.

The move was announced by Openai this week Join a joint project With Japan’s SoftBank calling it Stargate, with plans to build at least $100 billion on AI infrastructure in the US.

The move to become a for-profit company has proven controversial in Silicon Valley as the battle over Openai’s future is set to impact the global race to develop and commercialize artificial intelligence.

The proposed deal led to loud lawsuits from Musk, an Openai co-founder who has since created a rival outfit, XAI. Musk sought an injunction against the transfer, claiming that Openai had deceived early donors, including himself, into thinking they were supporting a research group.

Openai was founded as a nonprofit in 2015. In 2019, it developed a for-profit subsidiary, which capped returns for investors and gave the nonprofit’s board of directors full control of the for-profit arm.

Currently, its financial future is tied to developments such as reaching artificial general intelligence (AGI), a point at which technology will have similar levels of intelligence to humans. Sentences related to Agi The new structure is being written about, and the Financial Times has previously reported.

The company’s complex corporate governance came under scrutiny in November 2023, when its nonprofit board ousted Altman, only to be reinstated soon after.

People close to the negotiations hope the transaction can be completed this year, but added that the talks are subject to change and will likely drag on for several months.

The complexities of pricing such an emerging and powerful technology is another issue.

That decision falls to Openai’s board of directors, which includes Altman, former Salesforce CEO Brett Taylor and former US Treasury Secretary Larry Summers. They owe their main duty to “humanity, not Openai’s investors,” according to the startup’s charter.

“There is a clear conflict of interest for the council when it negotiates [the value of the non-profit]. Of course, the board wants to pay as little cash as it can justify.” “I’m not sure a real weapons operation could resolve this conflict.”

Kathleen Jennings, the attorney general in Delaware where Openai was founded, asked for more information about the deal.

Jennings said it was her responsibility to ensure the transfer was at a fair price and for the public benefit. However, Openai has not yet provided these details as they are still being ironed out internally and with stakeholders.

“There is no real precedent for this,” said a person with knowledge of the deliberations. “Research Company Becomes Worth $157 Billion.”

Additional reporting by Tabby Kinder and Stephen Morris in San Francisco