As OpenAI's Future Hangs In The Balance, Investors Contemplate Lawsuit Following Sam Altman's Exit

The sudden dismissal of Sam Altman as the CEO of the company he co-founded has reportedly sparked legal concerns among ChatGPT-parent OpenAI’s investors. 

What Happened: Altman’s unexpected exit, citing “breakdown of communications,” has led OpenAI investors to consider potential legal action against the board, reported Reuters, citing people familiar with the matter.  

The investors are concerned about the possible collapse of the AI startup, which could lead to significant financial losses. The abrupt decision by the board to let Altman go has led to talks of a mass resignation among OpenAI’s over 700 employees, who are demanding to replace the board. 

Microsoft Corporation MSFT is the largest shareholder in OpenAI, owning a 49% stake. The rest is divided among other investors, employees, and OpenAI’s nonprofit parent, according to data from Semafor.

OpenAI’s unique structure, transitioning from a nonprofit to a for-profit subsidiary in 2019, complicates the legal process for investors. 

Paul Weitzel, a law professor at the University of Nebraska, believes the investors may have a “weak case” due to businesses’ broad legal latitude in making leadership decisions.

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Why It Matters: The repercussions of Altman’s termination extend beyond OpenAI. 

Post his dismissal, Altman and Greg Brockman, another ousted OpenAI executive, were inducted into Microsoft’s advanced AI research team. 

Microsoft CEO Satya Nadella confirmed this move after the board refused to reinstate Altman and Brockman at OpenAI. 

Nadella, reportedly perturbed by Altman’s firing, saw this as the next plausible option for OpenAI’s biggest investor, Microsoft.

Photo Courtesy: Wikimedia Commons

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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.