Meta Urges Block on OpenAI's For-Profit Transition

(Reuters) – Meta Platforms is urging California's attorney general to block OpenAI's planned conversion to a for-profit company, according to the Wall Street Journal report on Friday.

In a letter to Attorney General Rob Bonta dated Thursday, Meta (NASDAQ:META) expressed concerns that allowing OpenAI to become a for-profit entity would set a dangerous precedent, enabling startups to benefit from the perks of nonprofit status until they're ready to become profitable.

> "OpenAI's conduct could have seismic implications for Silicon Valley. If OpenAI's new business model is valid, non-profit investors would get the same for-profit upside as those who invest the conventional way in for-profit companies while also benefiting from tax write-offs bestowed by the government," the WSJ report cited Meta as stating in the letter.

Both Meta and the California AG's office did not respond immediately to a Reuters request for comment.

Earlier on Friday, OpenAI sought to have a federal judge in California dismiss a request from billionaire Elon Musk, who is attempting to stop the company's transition to a for-profit model.

Musk filed a lawsuit against OpenAI and its CEO Sam Altman in August, alleging they violated contract terms by prioritizing profits over public welfare in developing AI. In November, Musk requested U.S. District Judge Yvonne Gonzalez Rogers (NYSE: ROG) in Oakland for a preliminary injunction to halt OpenAI's shift to a for-profit structure.

"While our work remains ongoing as we continue to consult independent financial and legal advisors, any potential restructuring would ensure the nonprofit continues to exist and thrive, and receives full value for its current stake in the OpenAI for-profit with an enhanced ability to pursue its mission," OpenAI chairman Bret Taylor stated.

In its letter, Meta noted support for Musk in representing the public's interests regarding OpenAI's for-profit aspirations, the WSJ report added.

Musk, a co-founder of OpenAI, has subsequently established a competing artificial intelligence company called xAI.