Delaware AG Hires Bank to Evaluate OpenAI Restructuring

Delaware AG Engages Bank for OpenAI Conversion Review

According to a report published by the Wall Street Journal on Wednesday, the Attorney General of Delaware is in the process of retaining an investment banking firm. This firm will provide counsel regarding OpenAI’s planned transition to a for-profit structure.

The independent assessment undertaken by this bank has the potential to extend the timeframe of the conversion process. It could also introduce further complications to OpenAI’s existing strategies.

Facilitating Investment and Public Offering

OpenAI’s shift to a for-profit model is intended to facilitate the attraction of new capital and ultimately enable a public offering. However, prior to these steps, the company must obtain the necessary approvals from relevant state regulatory bodies.

While both OpenAI and Microsoft have already engaged their own investment banks for advisory services related to this transaction, Delaware’s Attorney General is now requesting an impartial valuation of the equity that OpenAI’s non-profit entity will retain.

Focus on Nonprofit Equity Valuation

Regulatory scrutiny appears to be concentrated on a crucial element of OpenAI’s conversion. This factor has the potential to substantially influence the final price OpenAI will be required to pay in order to streamline its organizational structure.

Potential Impact of Elon Musk’s Bid

Experts in corporate governance suggest that Elon Musk’s previous offer to acquire OpenAI for $97.4 billion may have inadvertently increased the valuation of the company’s non-profit arm. This bid was made despite being swiftly declined by OpenAI.

The timing of Musk’s offer, even though rejected, could be a significant consideration in determining the fair value of the nonprofit’s equity during the conversion process.

Key Considerations for Regulators

• Ensuring a fair valuation of the nonprofit’s equity.
• Assessing the impact of external offers on the conversion price.
• Protecting the interests of stakeholders during the transition.

The Delaware Attorney General’s involvement signals a thorough review of OpenAI’s conversion, aiming to ensure transparency and equitable outcomes for all parties involved. The process will likely be closely watched by industry observers.