OpenAI's Opaque Ownership

Sam Altman, CEO of OpenAI, claims to own 0% of OpenAI LP, raising eyebrows about OpenAI's opaque ownership structure. [The Daily Peel... ]( October 4, 2023 | Peel #556 Silver banana goes to... [SRS Acquiom. ]( In this issue of the Peel: - Employee quit rates have taken an absolute dive since JPow nuked the economy with rate hikes. - Point Biopharma and Warby Parker had a ripe day, whereas Airbnb and FingerMotion pulled into the red following certain announcements. - Sam Altman, CEO of OpenAI, claims to own 0% of OpenAI LP, raising eyebrows about OpenAI's opaque ownership structure. Market Snapshot Happy Wednesday, apes. Well, at least one person in the U.S. lost their job yesterday, and while we sure hope it wasn’t you, we unfortunately can’t have the same hopes for (former) House Speaker Kevin McCarthy. Congrats to the U.S. on another first in 247 years! But, speaking of no hope, that pretty much sums up how equity traders were feeling on Tuesday. Equities dumped on the day in response to a whacked-out JOLTS report that sent bond yields to multi-decade highs and stocks through the floor. Utilities proved to be the only fun sector on the day, while everyone else was down for the entire session. And yes, bond yields did, in fact, hit yet another high since 2007. The 10-year U.S. yield spiked over 4.8% for a hot second before ultimately crashing right back to Earth after international morning sessions opened. The more rate-sensitive 2-year bill saw a similar path of trading, but to a lesser extent, and rose to just over 5.15%. Let’s get into it. Paradise Means Leaving Thumb Drives Behind [image]( You’ve got enough things to worry about. A thumb drive full of deal docs and data shouldn’t be one of them. With SRS Acquiom, it doesn’t have to be. Because once your files are up and organized on the VDR, they can stay there until you decide to take them down. Since there’s no additional charge to keep the VDR open, it’s totally up to you whether and when to close it. In the meantime, all that confidential data stays as secure as ever. It gets better: transparent, flat-rate pricing for however many users and uploads you need, for as long as you opt to keep the VDR open. No pay-by-the-page nonsense or unexpected upcharges here. It’s obviously a win-win as far as VDRs go. It’s also one more way SRS Acquiom maximizes efficiency throughout the deal process— from due diligence, to payments, all the way through post-closing. That’ll keep your clients happy and you looking great at what you do. Need more convincing? [Here’s more convincing]( > Banana Bits - For the first time in U.S. history, a sitting Speaker of the House of Representatives has been removed from leadership and returned to being just a normal, [lowly Congressman.](=) - “How do you do, fellow kids?”—Fed Chair Jerome Powell as Instagram’s [newest influencer bursts]() onto the scene. - Despite not changing their actual hiring or layoff rates in any meaningful way, [JOLTS data spiked in August]( for seemingly no reason at all. Macro Monkey Says Squidward’s Labor Market For the past couple of years, the coolest thing you could do in Corporate America was actually not to be the first in the office to try that new salad spot but to quit your job. Telling your old employer to shove it was not only a guarantee to finally make you feel as if you have some kind of control over your life, but it was also a near guarantee that you’d up your bag by doing so. Everybody wants to up their bag (in other words, “earn more money” for the sane people in the room). But, Americans are falling more and more into the Squidward Tentacles mindset when it comes to the job market: hate everything about your job, but never quit. Poor Squidward was stuck with a money-grubbing boss, Mr. Krabs, who undoubtedly created immense shareholder value, his “annoying” neighbor as his only coworker, and a deep hatred for all of his customers. Still, he never left the Krusty Krab, and with quitting rates in the U.S. falling back to 2019 levels, there are likely a lot more Squidwards out there as well. "Workers tend to stay ... when they believe the economy is headed for tough times ..." Hopefully, that doesn’t come with an uptick in clarinet playing, but there are two key factors impacting an individual's decision to stick with their current job: - Whether or not they are content in their current role - Whether or not they think they can (somewhat) easily find a new, better role Like many Americans apparently now believe, Squidward didn’t like his job prospects outside of the old crab trap that is the Krusty Krab. With the mindset of not liking your professional prospects outside of your current job comes a more-pessimistic-than-not view on the overall economy, most of the time. Workers tend to stay in their roles when they believe the economy is headed for tough times, and this is done for a lot of reasons, but primarily because everyone knows tougher times = layoffs. And layoffs tend to follow a LIFO structure for the accounting nerds out there. As you can see in the chart below, quit rates have taken an absolute dive since JPow nuked the economy with rate hikes. [image] [Source]() "... employers were throwing out cash hand over fist ..." Aside from a more pessimistic than otherwise outlook, other, more direct factors play a significant role in the decision to stay or go as well. Most notable, of course, is the size of your bag—or, in other words—MONEY. Following the brief but brutal annihilation of the economy when the 2019 pandemic began, labor demand skyrocketed as newly non-bankrupt businesses realized they were going to survive and that, in order to do so, they had to bring in employees. Crazy idea, I know. So, to do so, employers were throwing out cash hand over fist to incentivize people to make the switch and join their ranks. This created a “job switcher premium,” as the WSJ and others term it, meaning you could increase your salary and the growth rate of your salary by switching jobs. Check it out below from the same article: [image] [Source]() Now, that premium is narrowing. With that, employers can rest slightly more assured that their employees won’t tell them to f*ck off forever, but it also means that attracting new talent just got slightly harder. Maybe if Plankton had offered Squidward a more robust total comp package, he could’ve convinced him to jump ship and go to the Chum Bucket. But Squidward, like many Americans now, wasn’t too keen on the idea for one reason or another. What's Ripe Point Biopharma (PNT) ↑ 84.89% ↑ - Crack open the bottle, light the joint, turn the music up, and do whatever it is you do to celebrate. Well, only if you were a Point Biopharma shareholder, I suppose. - Unless you’re insider trading like that guy/gal that bought Splunk calls right before the acquisition almost definitely did, congrats on the W. Eli Lilly, a company boasting the highest valuation a healthcare company has ever seen at $500bn, decided to dish ~$1.4bn of that to Point Bio in the form of an acquisition. - Point Bio shares ripped on the day as the price marked by Eli sits at nearly 2x Monday’s closing price at $12.50/sh. - Further, the pharma giant is taking a big bet here. Point Bio has data from a recent study dropping in just a few weeks, and based on those numbers, this deal could pay for (or kill) itself almost immediately. Fingers crossed! Warby Parker (WRBY) ↑ 3.35% ↑ - Apparently, investors are finally seeing the value in this online glasses company. No pun intended there… - Anyway, Warby Parker shares had the blur on the company’s outlook staunchly clarified yesterday as Evercore upgraded the stock and called 2024 an inflection point year for the company. Charging like $200 a pop for people to see, I can see why. - The new $20/sh price target from overworked and still overpaid analysts got the people going on Tuesday, and now, investors think positive returns are in their sights. Or maybe Evercore just needs a new prescription. What's Rotten Airbnb (ABNB) ↓ 6.47% ↓ - People love self-deprecating humor, but CEO Brian Chesky’s interview with Bloomberg has us closer to sending him to the mental health clinic than the comedy club. Sh*tting all over yourself and your company sure is one bold strategy. - And while we’ll never tell fellow handsome innovators like Brian how to run their company, the market sure will. In fact, the market loves to do just that—especially if they were on the bearish side already. - Basically, Chesky came out and said Airbnb has gotten far too big for its britches. He said, “To use a precise metaphor, it’s kind of like we never fully built the foundation. Like… it had four pillars when we needed to have 10.” - There’s some revamping to do in which Chesky and team hope they’re able to reduce costs for Airbnb visitors, both financially and by not forcing them to do chores around a stranger’s house while on vacation. FingerMotion (FNGR) ↓ 34.57% ↓ - Native to wet regions of Central and South America, capybaras are essentially way too cute hairy water pigs and the world’s largest rodent. Oh, and they’re also the name of a Twitter (X?) handle that’s out for blood. - The 368-follower [Capybara Research]( account almost single-handedly took down FingerMotion, an (alleged) mobile payments company out of Singapore doing most of its business in China, in a single day. The firm released a short report against FingerMotion, and it is safe to say investors took it seriously. - There are countless people and Twitter accounts trying to become the next Hindenburg Research, but Capybara took a step in that direction today, calling FingerMotion a “serial case in stock promotion” and slapping a $1/sh price target. - Basically, the allegations are that shares only exist because of how hyped up the stock has been, flaws in their revenue recognition processes, and a myriad of past challenges with regulators like OTC Markets. It’s not a great look, but stay tuned to see how it plays out. Thought Banana OpaqueAI Okay, take a deep breath. One of the most innovative companies of the last decade and arguably the single most important company of the last year, OpenAI, has a weird ownership structure. For a company with the mission to “ensure artificial general intelligence benefits humanity,” understanding their ownership—and therefore, incentives to their behavior—seems important. But, like we said, it’s weird. So let’s break it down. On December 10, 2015, “OpenAI Inc.” was officially founded by a combination of tech moguls and investors, including CEO Sam Altman, Peter Thiel, Reid Hoffman, and plenty of others, including their largest investor/donor, Elon Musk. At this stage, OpenAI was essentially a privately funded research lab. The “firm” operated as a non-profit from its founding until 2019 when Microsoft, the absolute antithesis of “Open” technology, made its first +$1bn investment. "... a more recent $10bn investment gave Microsoft 49% of the 'firm’s' equity." In addition to giving OpenAI $1bn in 2019, the big tech firm has since juiced that to a few more investments, with little detail released publicly, but we do know a more recent $10bn investment gave Microsoft 49% of the “firm’s” equity. But, Microsoft only allegedly owns 49% of OpenAI LP, the entity responsible for most of OpenAI’s business operations under the parent company OpenAI Inc., but the exact percentage can’t be verified. Still, that extends to only the capped “for-profit” arm of the business. But wait—I thought OpenAI was a non-profit? Well, along with that $1bn investment from Microsoft, OpenAI realized that in order to attract and retain top talent to work for them, they’d have to give out compensation similar to the likes of Microsoft, Google, Amazon, and other AI competitors. So, the firm became a “capped profit” company, essentially allowing no investors to earn more than 100x their initial investments. That allowed key employees like Ilya Sutskever (Chief Scientist), Greg Brockman (CTO), Wojciech Zaremba (co-founder), and Sam Altman (CEO) to compensate themselves accordingly. Hardly any information is publicly available on the ownership of individual employee-investors like those above, but the real question is that of the top dawg, Sam Altman. "Hardly any information is publicly available on the ownership of individual employee-investors ..." Despite Elon giving the most to OpenAI’s founding, he quickly had to step back over concerns of conflict of interest with the Tesla AI team. That left Sam almost entirely in charge, and as of right now, he claims to own exactly 0% of OpenAI LP. At the same time, nobody “officially” owns OpenAI, but as the CEO, some speculate Sam’s control of OpenAI Inc. makes him essentially the owner of the rest of the company. None of this can be corroborated, but it makes sense considering his history as the CEO of Y Combinator and the deep cap table expertise that comes in that kind of a role. It might not be explicit, but de facto ownership could suggest that Altman owns a lot more than 0% here. Either way, for a company that’s supposed to be “Open,” the lack of transparency in ownership doesn’t help anyone sleep at night. The big question: Who really owns/controls OpenAI, and what are their incentives? If the goal is to benefit humanity, why not be transparent about it? Banana Brain Teaser Yesterday — You can have me but cannot hold me; Gain me slowly and quickly lose me. If treated with care, I can be great, And if betrayed, I will break. What am I? Answer Trust. Today — Nicky, Jared, and Antoine are an electrician, accountant, and nurse. Jared is the electrician's brother, and Antoine has never met the electrician or the accountant. Which person has each job? Shoot us your guesses at vyomesh@wallstreetoasis.com. Wise Investor Says “Go for a business that any id**t can run—because sooner or later, any idiot probably is going to run it.” — Peter Lynch How would you rate today’s Peel? [All the bananas](=) [Decent]() [Rotten AF]( Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? [Be smart like your friend](). [ADVERTISE](=) // [WSO ALPHA]() // [COURSES]( // [LEGAL](=) Don't want The Daily Peel? [Unsubscribe here](=). Click to [Unsubscribe]( from ALL WSO content IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States