OpenAI’s Promise to Stay in California Helped Clear the Path for Its IPO
The company assured state officials that it would stay in California as it continues its global expansion
Nearly two weeks ago, OpenAI Chief Executive Officer Sam Altman sat down for a call with California Attorney General Rob Bonta to deliver a simple message: He really wanted OpenAI to stay in California.
Behind it was a subtle threat. As Bonta weighed whether to bless OpenAI’s controversial conversion to a more-traditional company structure, OpenAI had spent months making the case that it was the economic heart of the California economy—and would be willing to leave if Bonta blocked its plan to convert to a simpler corporate structure.
Altman’s message was that he was committed to his home state and wouldn’t sue it or leave it as some others—such as his rival Elon Musk—had done. The discussion proved decisive, ending an extended investigation by Bonta’s office marked by furious public lobbying from OpenAI’s critics. When the final deal was done, it included a pledge for OpenAI to remain in California and expand its presence there, according to people familiar with the matter.
The agreement, made final Monday evening, allows OpenAI to move forward with a new corporate structure that paves the way for a blockbuster public listing that could arrive as soon as 2027, some of the people said. It would be one of the biggest IPOs in history. The discussions have been preliminary, and a public listing could ultimately happen later or be scrapped, the people said. Altman said Tuesday that an IPO is likely but said the company doesn’t have specific plans on timing.
In exchange for Bonta’s blessing, OpenAI accepted a sweeping set of rules that continues to place the company within the oversight of its original nonprofit, now called the OpenAI Foundation, as well as the attorney general.
“California is my home, and I love it here,” Altman tweeted Tuesday. “We really wanted to figure this out and are really happy about where it all landed.”
The standoff between the two sides pitted Silicon Valley’s biggest startup, backed by titans of the industry and billions of dollars in funding, against a Democratic attorney general with a long record of aggressive enforcement of tech companies. During the course of the talks, OpenAI became the most valuable U.S. startup and helped to fuel a stock-market rally, adding pressure on public officials who might have otherwise been inclined to take a harsher stance on its restructuring plans.
In recent weeks, San Francisco Mayor Daniel Lurie called Bonta to tell him how important it was that OpenAI remain in San Francisco, according to people familiar with the discussion. Altman served on Lurie’s transition team and was part of a group of tech executives who helped persuade President Trump not to send federal troops into San Francisco.
OpenAI also employed powerful Democratic operatives, including former Sen. Laphonza Butler, to also build support for its restructuring plan.
The California attorney general was prepared to file a lawsuit against OpenAI, but decided not to do so after reaching a few key points of agreement with the company, people familiar with the discussions said. They included receiving at least three weeks’ notice before the OpenAI nonprofit agreed to any major changes to the public-=benefit company’s structure or mission, and guarantees over the nonprofit board’s independence.
Deal negotiations
As part of the talks, OpenAI had to overcome a campaign opposing its restructuring from some of California’s largest labor unions, nonprofits and corporate rivals, which argued that OpenAI was violating its charitable mission. In May, OpenAI made a major concession to these groups when it agreed to keep its nonprofit parent in control of the new, for-profit company.
OpenAI then put out several economic reports making the case about its importance to the economy of California, including one in August that argued that California led the nation in productivity gains, was home to most privately held AI companies and had attracted 68% of all U.S. venture-capital dollars in the first half of this year.
In September, the California and Delaware attorneys general wrote to OpenAI with concerns about its commitment to safety in light of reports of recent suicides from people who had prolonged interactions with ChatGPT, including a Connecticut murder-suicide that was the subject of an article in The Wall Street Journal.
“It is our shared view that OpenAI and the industry at large are not where they need to be in ensuring safety in AI products’ development and deployment,” wrote Bonta and Delaware Attorney General Kathy Jennings in a Sept. 5 letter.
Altman met with Bonta that month and walked him through a number of child-safety improvements that OpenAI had made and would continue to make.
After OpenAI announced several child-safety changes, including parental controls, Bonta told Bloomberg News that he had met with Altman previously and felt he was “authentically committed” to addressing the issues the attorneys general had raised on child safety.
The agreement means the California attorney general’s office won’t sue OpenAI over its restructuring plan, but intends to keep a close watch to make sure the company adheres to its commitment to the public.
The OpenAI Foundation will remain in control of the company and be able to appoint the board of directors for the new public-benefit corporation. It also includes a safety committee that will be able to halt the release of new AI models.
News Corp, owner of the Journal, has a content-licensing partnership with OpenAI.
Write to Keach Hagey at Keach.Hagey@wsj.com and Berber Jin at berber.jin@wsj.com
