OpenAI IPO seems ripe to be torn to shreds over it’s bullshit nonprofit status

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OpenAI was founded in 2015 as a nonprofit (OpenAI, Inc.).

In 2019, it did not convert the nonprofit into a for-profit.

It created a separate capped-profit subsidiary, OpenAI LP.

The nonprofit still exists and controls the for-profit entity.

Investors receive capped returns; excess value remains under nonprofit control.

The nonprofit retains the governing authority and mission mandate.

Assets created by the nonprofit (OpenAI, Inc.) were retained by the nonprofit.

The nonprofit licensed technology, IP, and related assets to the for-profit subsidiary (OpenAI LP).

The assets were not transferred outright to private owners.

Control of the assets remains with the nonprofit via governance and contractual rights.

The for-profit operates using those assets under agreements set by the nonprofit.

Any value beyond capped investor returns accrues under nonprofit control.

Similar hybrid structures exist in biotech, universities, and research institutes.

The IRS allows nonprofits to own and control taxable subsidiaries.

The nonprofit’s board has fiduciary duties (duty of care, loyalty, obedience).

Transactions must avoid private inurement and excess benefit.

Terms must be arm’s-length and commercially reasonable.

IRS can impose intermediate sanctions (excise taxes, penalties, loss of exemption).

State attorneys general have oversight authority over nonprofit assets.

Contracts are legally binding and enforceable in court.

Auditors, regulators, and tax filings can review and challenge the terms.

What they cannot do:

Set terms primarily to enrich insiders.

Strip value from the nonprofit without fair consideration.

Ignore market valuation without justification.

What they can do:

License assets with negotiated terms.

Set caps, royalties, governance controls, and usage restrictions.

Structure terms to advance the nonprofit’s mission.

The nonprofit cannot “make up any terms it wants.”

Terms are constrained by law, fiduciary duty, market standards, and regulatory oversight.