[Atreiden]

But then private shareholders are able to extract shareholder value from the subsidiary, so the "nonprofit" component is utterly meaningless here.

How is this not illegal? What prevents any nonprofit from doing this to sidestep its filing status and extract profit?

[Tuna-Fish]

Every step taken by the nonprofit leadership has to be, (or at least seem to be at the time), net positive for the stated goal of the nonprofit. To be legal, the IPO needs to be a net gain for the nonprofit.

It can easily be that, if they believe that the capital it raises increases the long-term value of the company by a greater multiple than the proportion of the company that is lost from the nonprofit to outside investors.

The primary example of this is Novo Nordisk (the Ozempic company). Their largest shareholder is, through an intermediary, the Novo Nordisk Foundation, which is one of the largest charities in the world. Nordisk used to be a charity that owned 100% of it's own labs and facilities, but in 1989 they realized that they were just too small, and would get trampled by larger international players without greatly increasing their scope. So they made their subsidiary go public (through a complex merger, not an IPO), and now only own 28% of it, instead of 100%. But, in large part because of the capital that going public brought them, despite constantly distributing money for research and charity, that's 28% of a company that's more than 100x bigger that what they used to be. And they retained 77% voting control.

[yieldcrv]

A few things, but they work very well for our industry.

The rule is that the nonprofit and disqualified persons (mostly board members), cant own businesses together, well they can but not more than 35% of it together, and a max of 20% can have voting capability

The consequences arent immediate, non profits have 3 years to correct this

Now in the tech industry, getting VCs involved is already the plan from day one and founders get diluted, so getting below 35% is either easy, or easy within 3 years

so they’re fine

there’s a lot of things they can all do to deal with the share consolidation

[bwhiting2356]

not to be a shill, but isn't it good for the non-profit to own a big piece of a successful company?

[swores]

I think it depends on context.

If the private subsidiary was doing semi-unrelated stuff to the goals of the non-profit, and using it to fund the non-profit, then your logic could make sense - for example if a cancer research charity owned a profitable business and funnelled the profits up to spend on research, great.

But in OpenAI's case, the claimed goals of the non-profit were essentially "do AI in a way that puts safety above profits". And whether or not one agrees with their previous approach to safety, or even whether safety needs to be cared about, it's undeniable that the for-profit business isn't acting as useful fundraising for the non-profit's goals, it's literally acting in the opposite direction.

[JumpCrisscross]

> it's undeniable that the for-profit business isn't acting as useful fundraising for the non-profit's goals, it's literally acting in the opposite direction

It's generally not up to your or to me, it's up to the donors to the non-profit. If what you find to be undeniable is very much deniable to them, then that is their right.

The only question of public concern is whether OpenAI, Inc., a charity, meets the exemption requirements [1].

[1] https://www.irs.gov/charities-non-profits/charitable-organiz...