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OpenAI’s promise to stay in California helped clear the path for its IPO

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Re: OpenAI’s promise to stay in California helped clear the path for its IPO

#251

Post by vessenes »

bazmattaz wrote: post #140
vessenes wrote: post #122

Earlier quoted context omitted.

Jacques, I've been reading and enjoying your posts here for at least 15 years. (Thank you for your service.) But I think you're totally incorrect on this; oAI is going to be one of the enduring tech consumer brands built in this half of the 21st century.

Why do you say so? They’re burning cash and don’t currently have a viable path to profitability. Sure they have millions of MAU but not many paying ones.

I’ve written about it at some length here, but tldr: their ops are super profitable, likely 1bn per month net income right now. Their R&D costs are immense. You need to believe a story in which their R&D is a waste and other Competitor’s R&D is not or alternately all R&D in the space is a waste and they somehow are unable to use their capital advantage to maintain their substantial brand lead before you believe they are doomed.

Re: OpenAI’s promise to stay in California helped clear the path for its IPO

#252

Post by mmooss »

harmmonica wrote: post #84
hodder wrote: post #66

Can someone explain to me why California would believe Sam Altman plans to stay in California? This is a weak handshake agreement that could easily be flipped post IPO. The very flip from non-profit to IPO shows he will do what it takes for OpenAI to "succeed", so why would the geographical location be any more permanent than corporate structure. This isnt a diss to Sam either, it just shows he is motivated by whatev…

If they're still based in CA when they IPO at least those initial taxes will be collectible in state (assuming they're structured in a way where the IPO is a taxable event for the leadership and staff). Pretty sure the taxes collected from OpenAI will be the single biggest IPO tax windfall ever (correct me if I'm wrong, but I can't think of a bigger one).

What are the taxes on an IPO?

It's capital gains, which aren't taxed until the capital (IPO stock) is liquidated. I'm sure some people will liquidate their stock promptly but I expect that most will hold it, expecting further growth, and that the big investors, including Altman, will hold onto it for because of the same reason, because they need to sell optimism (what would people think if Altman or Microsoft sold a significant chunk of stock?), and because OpenAI needs lots of assets to build datacenters and buy power.

Re: OpenAI’s promise to stay in California helped clear the path for its IPO

#253

Post by clhodapp »

JumpCrisscross wrote: post #250
clhodapp wrote: post #245

Earlier quoted context omitted.

It's not that I think they owe me (or any one specific individual) some specific material value, it's that I don't believe they should be allowed to "take the money and run" after amassing it under the guise of being a charity. Their options should be to continue their mission or to donate their assets to other charities that might be able to further their original mission. Anything less is an affront to those that d…

I agree that the whole thing seems shady. But I'm struggling to identify anyone who was hurt. Vague notions of "everyone" doesn't really pass muster--if we can turn that into trillion dollar companies, we should do that!

It's not that I want to see someone made whole for some hurt.

What I want to see is for government to do its job and stamp a big "DENIED" on OpenAI's request to reorganize.

The response should be "Sorry if you feel like you screwed up your corporate structure, but your money really is locked in this non-profit and you can't just take it out".

Edit: Put a different way: Your point seems to be that there is no civil law damage so nothing can be done. My point is that this isn't a civil law matter, it's a corporate law matter: it's not about damages, it's about the social contract we hold corporations to in exchange for allowing them to exist.

Re: OpenAI’s promise to stay in California helped clear the path for its IPO

#255

Post by vessenes »

LudwigNagasena wrote: post #166
vessenes wrote: post #115

Earlier quoted context omitted.

There's so, so much misinformation about this out there. For example - every US nonprofit starts as a plain old vanilla C corporation, and then applies for 501(c)3 status which the IRS may or may not grant . It's a privilege to be a nonprofit. The punishment that may be levied on a nonprofit is ... loss of that status and a return to a commercial corporation. That loss of status might have knock-on impacts on things…

A corporation is locked into its nonprofit status due to its articles of incorporation and state law regardless of its federal tax-exempt status.

I think it’s generally more accurate to say that charitable assets are likely either locked to charitable purposes or need a fair valuation in case of disposal or wind down. I don’t know all the details here, but I would guess it’s enough of a mess between the parent and the for profit sub that some negotiation was inevitable.

Re: OpenAI’s promise to stay in California helped clear the path for its IPO

#256

Post by csomar »

JumpCrisscross wrote: post #238
terminalshort wrote: post #200

Earlier quoted context omitted.

I don't want to downplay the network effects here, but it's in CA entirely by coincidence. SV is in CA because William Shockley's family is there, which is why he founded Shockley Semiconductor there. It could have been somewhere else. The 2nd largest tech hub is in Seattle. It's there because that's were Bill Gates is from. Is SF the best place to start a startup if you want in office talent in 2025. 100% yes, but t…

> that has nothing to do with the Bay Area and everything to do with accidents of history I think you’re wrong. But that’s irrelevant. The fact that it exists now is what gives it staying power. One of the surest bets I’ve seen in seed and Series A investing is when a market has one or two competitors in a cluster and the rest outside. The insiders win. Always. It’s the easiest bulldozing strategy that exists.

> I think you’re wrong. But that’s irrelevant.

It's on you to prove the parent wrong and you provided nothing to explain why the Bay Area is special beyond history/staying power.

Re: OpenAI’s promise to stay in California helped clear the path for its IPO

#257

Post by bazmattaz »

array_key_first wrote: post #209
laluser wrote: post #163

Earlier quoted context omitted.

Look at all the companies that have 'burned cash' with no viable path to profitability over the last 20 years. The good ones outlive that criticism, easily. Think Uber, etc. They clearly see a path to profitability and they have plenty of room to experiment here with what works. With new partnerships and dependencies, they won't run out of cash for a long time.

I would not be convinced they outlive the criticism. I think it's highly likely in the next 10 years companies like Spotify and Uber will no longer exist. They're fundamentally antogonistic to their capital.

Spotify is a profitable business now though right? Sure it doesn’t make huge profits due to paying out about 70% to larks but it’s finally profitable

Re: OpenAI’s promise to stay in California helped clear the path for its IPO

#258

Post by [deleted] »

hodder wrote: post #66

Can someone explain to me why California would believe Sam Altman plans to stay in California? This is a weak handshake agreement that could easily be flipped post IPO. The very flip from non-profit to IPO shows he will do what it takes for OpenAI to "succeed", so why would the geographical location be any more permanent than corporate structure. This isnt a diss to Sam either, it just shows he is motivated by whatev…

[deleted]

Re: OpenAI’s promise to stay in California helped clear the path for its IPO

#259

Post by com2kid »

SR2Z wrote: post #230
wubrr wrote: post #196

Earlier quoted context omitted.

> Exhibit A for Covid having not changed this is the continuing supremacy of Silicon Valley (tech) You mean like when China built chatgpt 4 in a weekend and open-sourced it for giggles? > Shenzhen (manufacturing) ..or you mean how US manufacturing 'clusters' almost completely disappeared/replaced by Chinese ones? > Proximity to investors. Proximity to customers. Proximity to a skilled employee pool. Proxomity to acqu…

> You mean like when China built chatgpt 4 in a weekend and open-sourced it for giggles? DeepSeek R1 is an amazing feat. It's not at the same level as other large frontier models from American companies, just close enough to make them sweat. > ..or you mean how US manufacturing 'clusters' almost completely disappeared/replaced by Chinese ones? The value of goods manufactured in the US has never been higher. US manufa…

> Manufacturing has disappeared as a share of GDP, but that's not because we make less stuff.

We assemble. The actual parts are largely made overseas.

Because location matters, assemblers in China are able to do better work at a much lower price, see every Chinese EV company, or Chinese drone companies.

Heck in China you can buy a competent Chinese EV motorscooter for less than a kids bicycle in America.

Re: OpenAI’s promise to stay in California helped clear the path for its IPO

#260

Post by dragonwriter »

hodder wrote: post #66

Can someone explain to me why California would believe Sam Altman plans to stay in California? This is a weak handshake agreement that could easily be flipped post IPO. The very flip from non-profit to IPO shows he will do what it takes for OpenAI to "succeed", so why would the geographical location be any more permanent than corporate structure. This isnt a diss to Sam either, it just shows he is motivated by whatev…

> Can someone explain to me why California would believe Sam Altman plans to stay in California? This is a weak handshake agreement that could easily be flipped post IPO.

It is not a “handshake agreement”, but binding written agreement with terms constraining the governance of the restructure OpenAI entities.

https://oag.ca.gov/system/files/attachments/press-docs/Final Executed MOU Between OpenAI and California AG re Notice of Conditions of Non-Objection %2810.27.2025%29 %28Signed by OpenAI%29 %28Signed by CA DOJ%29.pdf

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