Coalition asks SEC to review OpenAI IPO governance risks
EyesOnOpenAI says nonprofit control, California conditions and valuation issues warrant fuller disclosures before a public listing.
By Daniel Okafor · Business Editor
3 min read
A coalition of nonprofit, labor and philanthropic groups is pressing the Securities and Exchange Commission to require more disclosure before OpenAI moves ahead with a planned public offering. EyesOnOpenAI says investors need a fuller account of how the company’s nonprofit control structure could affect shareholder rights and financial returns.
The coalition, which says it includes more than 50 organizations, submitted a letter to the SEC asking the agency to make OpenAI disclose governance risks and possible financial consequences tied to its restructuring. In a Fortune commentary, coalition members Orson Aguilar and Catherine Bracy argued that the company’s proposed offering raises legal and governance questions that ordinary IPO disclosures may not capture.
Nonprofit control is central to the concern
According to Aguilar and Bracy, OpenAI would be the first 501(c)(3) charity to take a controlled entity public. They said investors would be buying into a company ultimately controlled by the OpenAI Foundation, a charitable nonprofit whose legal obligations differ from those of a conventional public-company parent.
The authors said the foundation’s authority comes partly through a special Class N stock share. They said that share gives the nonprofit broad power over the makeup of OpenAI’s board and sole authority over “safety and security decisions,” a term they said is not defined in the company’s articles of incorporation.
Aguilar and Bracy also said the governance share is separate from the foundation’s common stock, which they said accounts for a 26% equity stake. In their view, that means the nonprofit could sell its equity interest while retaining board control through the special share.
California approval came with conditions
The commentary said California Attorney General Rob Bonta approved OpenAI’s restructuring, but only with conditions requiring the foundation to keep operating as a genuine nonprofit under California charitable trust law. Aguilar and Bracy said the California attorney general’s office confirmed, in response to a public records request, that it is conducting an ongoing investigation into OpenAI.
The authors also raised a valuation issue tied to the restructuring. They said that when OpenAI’s for-profit arm became a separate public benefit corporation, no independent appraiser confirmed that the foundation received fair value for charitable assets it gave up.
According to Aguilar and Bracy, the foundation received about 26% equity in the exchange. They argued that without independent confirmation of fair value, a court or regulator could require additional equity transfers.
SEC disclosure fight
The coalition’s request comes as the SEC considers rules that Aguilar and Bracy said would reduce disclosure requirements for higher-valued IPOs. They said OpenAI’s valuation could reach as high as $1 trillion, making lighter disclosure standards risky for investors and the broader economy.
The authors said OpenAI’s structure differs from competitors such as Microsoft, Google and Anthropic because a charitable entity controls its board and must prioritize a public-interest mission. They urged the SEC to pause or condition the IPO until investors receive detailed disclosures about governance conflicts and possible legal outcomes.
This story draws on original reporting from Fortune.