Investors are expressing concerns about the potential loss of hundreds of millions of dollars they have invested in the company
OpenAI is facing the prospect of legal action from some of its investors, according to sources familiar with the matter. This development comes in the aftermath of the board's decision to remove CEO Sam Altman, a move that has raised concerns about a potential mass departure of employees.
Sources indicate that investors are consulting with legal advisors to assess their available options. The possibility of a lawsuit against OpenAI remains uncertain at this point, as per a report by Reuters.
Investors are expressing concerns about the potential loss of hundreds of millions of dollars they have invested in the company. Open AI holds significant value in some portfolios, and there is growing apprehension about the potential collapse of this prominent startup.
As per sources, Microsoft holds a 49 per cent stake in the for-profit operating company. The remaining 49 per cent is divided among other investors and employees, while the nonprofit parent company of OpenAI retains a 2 per cent ownership, according to Semafor.
Altman was dismissed from OpenAI's board last Friday, in the aftermath of which, a significant majority of over 700 employees at OpenAI issued a collective ultimatum, stating that they would resign unless the board was replaced.
OpenAI differs from typical venture-backed companies as its nonprofit parent 'OpenAI Nonprofit' prioritizes humanity over investor interests. This distinctive structure gives employees more leverage in influencing the board than traditional venture capitalists, says Minor Myers, a law professor at the University of Connecticut. "There is nobody exactly who is in the seat of an injured investor," he told Reuters.
While nonprofit boards are bound by legal obligations to the organizations they supervise, experts note that obligations such as exercising care and avoiding self-dealing afford a significant degree of flexibility for leadership decisions.