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Tagged: investors

OpenAI | Sam Altman sacked: Makers of ChatGPT, OpenAI investors mull lawsuit

Some investors in OpenAI, makers of ChatGPT, are exploring legal recourse against the company’s board, sources familiar with the matter told Reuters on Monday, after the directors ousted CEO Sam Altman and sparked a potential mass exodus of employees.

Sources said investors are working with legal advisers to study their options.

It was not immediately clear if these investors will sue OpenAI.

Investors worry that they could lose hundreds of millions of dollars they invested in OpenAI, a crown jewel in some of their portfolios, with the potential collapse of the hottest start-up in the rapidly growing generative AI sector.

OpenAI did not respond to a request for comment.

Microsoft owns 49 per cent of the for-profit operating company, according to sources familiar with the matter. Other investors and employees control 49 per cent, with 2 per cent owned by OpenAI’s nonprofit parent, according to Semafor.

OpenAI’s board fired Altman on Friday after a “breakdown of communications”, according to an internal memo seen by Reuters.

By Monday, most of OpenAI’s more than 700 employees threatened to resign unless the company replaced the board.

Venture capital investors usually hold board seats or voting power in their portfolio companies but OpenAI is controlled by its nonprofit parent company OpenAI Nonprofit, which according to OpenAI’s website was created to benefit “humanity, not OpenAI investors.”

As a result, employees have more leverage in pressuring the board than the venture capitalists who helped fund the company, said Minor Myers, a law professor at the University of Connecticut. “There is nobody exactly who is in the seat of an injured investor,” he said.

That is a feature, not a bug of OpenAI’s structure, which started as a nonprofit but added a for-profit subsidiary in 2019 to raise capital. Keeping control of operations lets the nonprofit

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