Ever since OpenAI filed its initial paperwork to become a publicly traded company, the headlines about the historic nature of this IPO, and the billions OpenAI could raise have continued pouring in. While there is no shortage of news coverage, it’s missing key details any savvy investor would want to know.
In OpenAI, investors aren’t investing in a typical corporation—they’re putting money into a company that’s ultimately controlled by a 501(c)(3) charitable nonprofit. With this unconventional and unprecedented structure—OpenAI will be the first 501(c)(3) charity to take a controlled entity public—comes a growing mountain of unresolved legal questions, undisclosed conflicts, and governance risks that could backfire on shareholders at any moment.
That’s why EyesOnOpenAI–our coalition of over 50 nonprofit, labor and philanthropic organizations–submitted a letter to the SEC urging it to ensure OpenAI fully disclose each of its governance risks and their potential financial consequences for investors. Recently, the SEC has opted to embrace a “Make IPOs Great Again,” proposing rules that would require less disclosure for higher-valued IPOs. With a valuation that could be as high as $1 trillion, holding OpenAI to a lower bar would be perilous for investors and our economy at large. As regulators charged with protecting investors and maintaining fair and orderly markets, the SEC has a duty to pause or condition the dicey OpenAI IPO pending full disclosure of governance risk scenarios.
Many investors will be surprised to learn that OpenAI’s nonprofit—the OpenAI Foundation—still controls the company. Its control derives from a special share of Class N stock through which the nonprofit has almost complete control over the composition of the company’s board, as well as sole authority over all “safety and security decisions” which are undefined in the company’s articles of incorporation. What’s more, this governance stock exists in addition to the nonprofit’s common stock ownership, through which it claims its 26% equity stake in the company. This means the nonprofit governing entity—which is legally bound to prioritize the nonprofit mission over share price—can divest its equity stake at any time and still control the board.
California Attorney General Bonta approved OpenAI’s restructuring—but his sign-off was explicitly conditional on binding commitments that the Foundation would continue operating as a genuine nonprofit under California charitable trust law. The California Attorney General has confirmed to us, in response to a public records request, that it is conducting an ongoing investigation into OpenAI.
There’s also a valuation problem that could result in court interference. When OpenAI’s for-profit arm went from being a subsidiary to a separate Public Benefit Corporation (PBC), no independent appraiser confirmed the Foundation received fair value for the charitable assets it surrendered. While the Foundation received roughly 26% equity in exchange, without independent confirmation that this was a fair deal, a court or other regulator could require additional equity transfers.
Even in the best-case scenario—OpenAI’s full legal compliance, no violations, a fair exchange—investors are still putting money into a company beholden to public interest obligations its competitors don’t face, governed solely by a nonprofit. OpenAI wants to be valued like a technology company while it operates under constraints no technology company faces. Microsoft, Google, and Anthropic compete for the same customers, the same talent, and the same regulatory goodwill, but without a charitable equity-holder controlling their boards and a court-enforceable mission to benefit humanity over shareholders. OpenAI’s lawyers and comms shop have dressed up that structural liability as a heartwarming origin story. But when the inevitable tension between maximizing shareholder returns and honoring charitable trust obligations finally forces a legal reckoning, it will be ordinary investors–not Sam Altman, not the Foundation’s board–who will bear the brunt.
The SEC has a clear responsibility to ensure investors are aware of the unprecedented nature of OpenAI’s governance structure, the conflicts of interest, and the risks involved. Investors should be demanding transparency from the SEC before making that bet. The stakes extend far beyond investor returns. If OpenAI’s IPO fails, it could shake an economy that’s increasingly dependent on the AI boom. If it succeeds without accountability, we end up underwriting a company that broke the law and the promise it made to us, the public.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
Orson Aguilar is the founding president and CEO of LatinoProsperity. Catherine Bracy is the founder and CEO of TechEquity and author of “World Eaters.” Aguilar and Bracy are members of the EyesOnOpenAI coalition.
