OpenAI staff, investors to sue directors who fired Sam Altman, Greg Brockman for massive financial loss

In a recent development, certain investors in OpenAI, the makers of ChatGPT, are contemplating legal action against the company’s board, according to insider sources cited by Reuters on Monday. This move comes in the aftermath of the board’s decision to remove CEO Sam Altman, a decision that has triggered the potential departure of a significant number of employees. Sources reveal that the concerned investors are actively consulting legal advisors to thoroughly examine their available options. While the possibility of a lawsuit against OpenAI remains uncertain at this stage, investors are expressing deep concerns about the substantial financial risks they face. For many, OpenAI represents a valuable asset within their investment portfolios, and the perceived instability raises fears of significant losses in the wake of the potential collapse of the highly esteemed AI startup. The situation escalated on Monday as over 700 of OpenAI’s employees threatened mass resignations unless the current board was replaced. The board’s decision to terminate Altman, reportedly due to a “breakdown of communications,” was communicated through an internal memo. What distinguishes this case is the unusual position of venture capital (VC) investors. Typically, VC investors hold board seats or wield voting power in their invested companies. However, in the case of OpenAI, control lies with its non-profit parent company, OpenAI Nonprofit, established with the mission of benefiting humanity rather than prioritizing OpenAI investors. Minor Myers, a law professor at the University of Connecticut, highlighted that this unique structure grants employees more leverage than the venture capitalists who have played a crucial role in funding their salaries. As the turmoil unfolds, it’s crucial to note that Microsoft holds a 49 per cent stake in OpenAI, while other investors and employees collectively control another 49 per cent. The remaining 2 per cent is owned by OpenAI’s non-profit parent. Before Altman’s removal, OpenAI was on the brink of a $90 billion initial public offering (IPO). However, given the current circumstances, the likelihood of any board, be it Microsoft or OpenAI’s investors, pursuing an IPO in the near future seems highly improbable.