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I don’t get what’s the point of non-profits if you can IPO them. How does that make any sense?

by fear91 4mo ago

wmf 4mo ago
They're IPOing a commercial subsidiary of OpenAI so that it can donate even more money to the parent nonprofit. (Actually the subsidiary is everything and the nonprofit is a do-nothing fig leaf but the IRS and Congress seem to not care enough to stop them.)
- Yizahi 4mo ago
  Checks and balances dear sirs and madams, checks and balances. Excepts apparently it meant cheques used to top up account balances.
  - deleted 4mo ago
    [deleted]
  - nonethewiser 4mo ago
    Checks and balances concern constraints on government power. Whether OpenAI's structure complies with the law is a question of regulation, not checks and balances.
    - Yizahi 4mo ago
      It's not a question of regulation, but a question of enforcing said regulation and a question of enforcing a lawful process which follows a breach of a regulation. Which is exactly a spirit of the phrase "checks and balances". It means that if one branch breaks law, then the other branch enforces a compliance with laws/regulations. Of even inside the same branch, if a temporary elected doofus in charge is breaking the law, then people even lower in hierarchy will enforce normal branch functioning. Which in practice was super easy to break, sabotage and blackmail, so neither checking nor balancing happened, everyone went corrupt or impotent simultaneously.
- Atreiden 4mo ago
  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?
  - bwhiting2356 4mo ago
    not to be a shill, but isn't it good for the non-profit to own a big piece of a successful company?
    - swores 4mo ago
      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 4mo ago
        > 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-organizations/exemption-requirements-501c3-organizations https://www.irs.gov/charities-non-profits/charitable-organiz...
  - yieldcrv 4mo ago
    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
- siren2026 4mo ago
  Just the fact that they still calling themselves OpenAI is so grotesque. Similar to Google with "Don't be evil". At least they got the decency to eventually remove it when they realized they were actually doing evil.
an0malous 4mo ago
There is no point, it’s just government sanctioned virtue signaling
tedsanders 4mo ago
The nonprofit (OpenAI Foundation) owns ~26% of the for-profit, plus some extra warrants. The for-profit (OpenAI Group PBC) is what's filing the S-1 Draft. The OpenAI Foundation also exclusively appoints the board of the OpenAI Group PBC and can replace directors at any time. https://openai.com/our-structure/ https://openai.com/our-structure/ (I work at OpenAI, but I am not a lawyer and am not speaking on behalf of OpenAI - just sharing my personal understanding.)
- ncruces 4mo ago
  > The OpenAI Foundation also exclusively appoints the board of the OpenAI Group PBC and can replace directors at any time. Isn't it hard to write this with a straight face?
- to11mtm 4mo ago
  If they truly wanted it to be in the benefit of the not-for-profit and safe from interference, the ownership by the foundation would be much closer to or just over 50%.... just thinking out loud...
  - chippiewill 4mo ago
    The magic 50% ownership isn't relevant for that purpose. There are special provisions which means that the Foundation effectively exerts full control over the company because it appoints the entire board.
ghshephard 4mo ago
See: https://www.axios.com/2023/11/18/how-openai-board-is-structured https://www.axios.com/2023/11/18/how-openai-board-is-structu... for the OpenAI Structure. 1) In order to fund research - this stuff costs 10s of billions of dollars - everyone, from Ilya, to Elon, to Sam - all agreed that they would require a profit-arm to raise money. Nobody was going to sponsor that 10s of billions of dollars to a non-profit. 2) The non profit is still there - and controls the commercial element.
- argee 4mo ago
  > Nobody was going to sponsor that 10s of billions of dollars to a non-profit How much has MacKenzie Scott donated to non-profits again? Seems like such a claim is on thin ice.
- alpinisme 4mo ago
  “Controls” That will be especially untrue after IPO when shareholders can claim there are fiduciary responsibilities that conflict with the non profit goals.
  - super256 4mo ago
    The non profit is a big shareholder of the commercial subsidiary
  - JumpCrisscross 4mo ago
    > when shareholders can claim there are fiduciary responsibilities that conflict with the non profit goals The for-profit has fiduciary responsibility to the non-profit as well as other shareholders. The IPO doesn't really change that.
  - alextheparrot 4mo ago
    The for-profit is a PBC with the sane mission at the nonprofit [0] [0] https://openai.com/index/built-to-benefit-everyone/ https://openai.com/index/built-to-benefit-everyone/
- JumpCrisscross 4mo ago
spac 4mo ago
Novo Nordisk
- cj 4mo ago
  https://en.wikipedia.org/wiki/Novo_Holdings_A/S https://en.wikipedia.org/wiki/Novo_Holdings_A/S
486sx33 4mo ago
[dead]
yieldcrv 4mo ago
The corporation selling shares is just primarily owned by the non profit The corporation selling shares is subject to normal corporate tax regime The real answer to your question is that non profits can own shares, and there is no legal difference between passive investment of other publicly traded companies and highly consolidated shares of a private company. In the US it is seen as merely happenstance that we have such a liquid market where the shares themselves can rapidly change in value and create profits, but there is nothing controversial about that.
deleted 4mo ago
[deleted]

I don’t get what’s the point of non-profits if you can IPO them. How does that make any sense?

by fear91 4mo ago

I don’t get what’s the point of non-profits if you can IPO them. How does that make any sense?

wmf 4mo ago

They're IPOing a commercial subsidiary of OpenAI so that it can donate even more money to the parent nonprofit. (Actually the subsidiary is everything and the nonprofit is a do-nothing fig leaf but the IRS and Congress seem to not care enough to stop them.)

Yizahi 4mo ago
Checks and balances dear sirs and madams, checks and balances. Excepts apparently it meant cheques used to top up account balances.
- deleted 4mo ago
  [deleted]
- nonethewiser 4mo ago
  Checks and balances concern constraints on government power. Whether OpenAI's structure complies with the law is a question of regulation, not checks and balances.
  - Yizahi 4mo ago
    It's not a question of regulation, but a question of enforcing said regulation and a question of enforcing a lawful process which follows a breach of a regulation. Which is exactly a spirit of the phrase "checks and balances". It means that if one branch breaks law, then the other branch enforces a compliance with laws/regulations. Of even inside the same branch, if a temporary elected doofus in charge is breaking the law, then people even lower in hierarchy will enforce normal branch functioning. Which in practice was super easy to break, sabotage and blackmail, so neither checking nor balancing happened, everyone went corrupt or impotent simultaneously.
Atreiden 4mo ago
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?
- bwhiting2356 4mo ago
  not to be a shill, but isn't it good for the non-profit to own a big piece of a successful company?
  - swores 4mo ago
    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 4mo ago
      > 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-organizations/exemption-requirements-501c3-organizations https://www.irs.gov/charities-non-profits/charitable-organiz...
- yieldcrv 4mo ago
  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
siren2026 4mo ago
Just the fact that they still calling themselves OpenAI is so grotesque. Similar to Google with "Don't be evil". At least they got the decency to eventually remove it when they realized they were actually doing evil.

an0malous 4mo ago

There is no point, it’s just government sanctioned virtue signaling

tedsanders 4mo ago

The nonprofit (OpenAI Foundation) owns ~26% of the for-profit, plus some extra warrants. The for-profit (OpenAI Group PBC) is what's filing the S-1 Draft. The OpenAI Foundation also exclusively appoints the board of the OpenAI Group PBC and can replace directors at any time. https://openai.com/our-structure/ https://openai.com/our-structure/ (I work at OpenAI, but I am not a lawyer and am not speaking on behalf of OpenAI - just sharing my personal understanding.)

ncruces 4mo ago
> The OpenAI Foundation also exclusively appoints the board of the OpenAI Group PBC and can replace directors at any time. Isn't it hard to write this with a straight face?
to11mtm 4mo ago
If they truly wanted it to be in the benefit of the not-for-profit and safe from interference, the ownership by the foundation would be much closer to or just over 50%.... just thinking out loud...
- chippiewill 4mo ago
  The magic 50% ownership isn't relevant for that purpose. There are special provisions which means that the Foundation effectively exerts full control over the company because it appoints the entire board.

ghshephard 4mo ago

See: https://www.axios.com/2023/11/18/how-openai-board-is-structured https://www.axios.com/2023/11/18/how-openai-board-is-structu... for the OpenAI Structure. 1) In order to fund research - this stuff costs 10s of billions of dollars - everyone, from Ilya, to Elon, to Sam - all agreed that they would require a profit-arm to raise money. Nobody was going to sponsor that 10s of billions of dollars to a non-profit. 2) The non profit is still there - and controls the commercial element.

argee 4mo ago
> Nobody was going to sponsor that 10s of billions of dollars to a non-profit How much has MacKenzie Scott donated to non-profits again? Seems like such a claim is on thin ice.
alpinisme 4mo ago
“Controls” That will be especially untrue after IPO when shareholders can claim there are fiduciary responsibilities that conflict with the non profit goals.
- super256 4mo ago
  The non profit is a big shareholder of the commercial subsidiary
- JumpCrisscross 4mo ago
  > when shareholders can claim there are fiduciary responsibilities that conflict with the non profit goals The for-profit has fiduciary responsibility to the non-profit as well as other shareholders. The IPO doesn't really change that.
- alextheparrot 4mo ago
  The for-profit is a PBC with the sane mission at the nonprofit [0] [0] https://openai.com/index/built-to-benefit-everyone/ https://openai.com/index/built-to-benefit-everyone/
JumpCrisscross 4mo ago

spac 4mo ago

Novo Nordisk

cj 4mo ago
https://en.wikipedia.org/wiki/Novo_Holdings_A/S https://en.wikipedia.org/wiki/Novo_Holdings_A/S

486sx33 4mo ago

[dead]

yieldcrv 4mo ago

The corporation selling shares is just primarily owned by the non profit The corporation selling shares is subject to normal corporate tax regime The real answer to your question is that non profits can own shares, and there is no legal difference between passive investment of other publicly traded companies and highly consolidated shares of a private company. In the US it is seen as merely happenstance that we have such a liquid market where the shares themselves can rapidly change in value and create profits, but there is nothing controversial about that.

deleted 4mo ago

[deleted]