As a series of blockbuster I.P.O.s mint a new crop of the ultrawealthy, nonprofits are scrambling to figure out how they can share in the bonanza.<\/p>\n
University fund-raising departments are making lists of potential white whales and philanthropy executives are doing napkin math to prepare for a once-in-a-generation windfall that could create hundreds of billions of dollars in new donations.<\/p>\n
Some are less optimistic than others. In recent years, a billionaire backlash<\/a> against charitable giving has emerged, as a subset of the wealthiest people in the world argue that business success, not philanthropy, is the best way to give back.<\/p>\n But the founders of OpenAI and Anthropic \u2014 both expected to be among the largest I.P.O.s of all time \u2014 have deep links to effective altruism, a philanthropic philosophy that seeks to maximize the impact of giving.<\/p>\n And even those who aren\u2019t feeling particularly generous may be moved by the tax burden that will come with cashing in their highly appreciated shares: If they sold, say, $10 million worth of stock, they could get a tax bill that exceeded $3.5 million.<\/p>\n \u201cIt\u2019s common to see vast amounts of low-basis, high-gain stock put in the hands of people that have no clue what an exit strategy is,\u201d said Randy Fox, founder of Two Hawks, a family office consulting firm. \u201cOne of the only ways that you can eliminate capital gains taxes is by using charitable vehicles.\u201d<\/p>\n With advisers also having an incentive to collect the fees for setting up charitable trusts and foundations, the nonprofit sector could see an annual infusion of more than $100 billion, according to some estimates.<\/p>\n Secondary windfall<\/p>\n Nan Ransohoff, the head of public goods at the payment processor Stripe, did the napkin math<\/a> to figure out how large this windfall could be.<\/p>\n Using current valuations, she figured that the nonprofit OpenAI Foundation, which owns 26 percent of OpenAI, would see about $220 billion become liquid when the company went public.<\/p>\n The seven founders of Anthropic, which is expected to have an enormous I.P.O. as soon as this fall, have each pledged to give away 80 percent of their wealth, which could be about $90 billion. Anthropic also has a philanthropic matching program, which could mean another $60 billion in funds earmarked for giving.<\/p>\n In total, Ransohoff estimated in a Substack post<\/a>, between $37 billion and $100 billion could become available to charities annually. \u201cYou could fully fund the Gates Foundation many times over, and then there\u2019s still more to be spent,\u201d she told DealBook.<\/p>\n And that doesn\u2019t even include OpenAI\u2019s employees. Or the newly rich created by SpaceX, whose I.P.O. spawned an estimated 4,400 millionaires<\/a> (and some 400 employees now worth more than $100 million). Or the many other IP.O.s on the docket. The value of such public offerings could rise to $160 billion, the biggest year in absolute proceeds ever recorded, according to Goldman Sachs<\/a>.<\/p>\n Tax incentives<\/p>\n Giving money away is a common maneuver to avoid taxes: Up to 74 cents of every dollar<\/a> donated to charity would have been paid as taxes, according to the Institute for Policy Studies. It reported that charitable giving in 2022 alone had resulted in $73 billion in lost tax revenue<\/a>.<\/p>\n In California, where both OpenAI and Anthropic are based, and where SpaceX has thousands of employees, some new billionaires may also be in a rush to reduce their net worth before the State Legislature aims to levy a one-time 5 percent excise tax on billionaires<\/a>. That gives them a double incentive to donate.<\/p>\n Jon Feldhammer, a partner at the law firm Baker Botts, said a client with $300 million worth of stock options at a leading A.I. company set to go public this year was thinking of moving out of the state. <\/p>\n \u201cHe has all options on the table,\u201d Feldhammer said. \u201cI have a lot of clients looking at leaving California in a much more serious way and in much larger numbers than I\u2019ve ever seen before.\u201d<\/p>\n Some common donation strategies include donating stock instead of cash to avoid capital gains taxes, and creating a trust that distributes fixed income to both the donor (or the donor\u2019s heirs) and a chosen charity.<\/p>\n Wealth advisers say a donor-advised fund has proved the most popular for young employees bracing for an I.P.O. windfall this year. These nonprofit charitable giving accounts allow the donor to make tax-deductible stock contributions, and then direct funds from the account over time to various charities.<\/p>\n It\u2019s cheap, anonymous and easy, said Paul Tramontano, executive managing director at Cresset Asset Management. <\/p>\n \u201cThere are no tax returns, and no filings to do,\u201d he said. \u201cIt\u2019s sort of the best of both worlds.\u201d<\/p>\n A new kind of philanthropy<\/p>\n Some of the most famous philanthropists throughout history \u2014 Rockefeller, Gates, Bloomberg \u2014 have created private foundations. But that path may not be as appealing to the latest batch of A.I. millionaires and billionaires.<\/p>\n A family foundation \u201creally does require care and feeding,\u201d said Brandon Smith, director of estate planning at LNW Advisors. He has over 10 Anthropic employees as clients, some of them set to make upward of $100 million when the company goes public. \u201cMost of these employees won\u2019t have that kind of time,\u201d he added.<\/p>\n Ransohoff argues that the recipients of windfalls are likely to be interested in expanding beyond traditional philanthropic organizations. Many people who work in artificial intelligence, she said, have fast timelines and appreciate philanthropic organizations that operate more like start-ups. They may be willing to take high-risk, high-reward bets.<\/p>\n \u201cI\u2019ve been thinking about: Should we do a Y Combinator for philanthropic start-ups?\u201d she said.<\/p>\n Stripe recently launched a $500 million fund alongside the OpenAI Foundation, Anthropic, Bill Gates and others, aimed at backing efforts that prevent respiratory infections like the flu and common cold.<\/p>\n Ransohoff\u2019s main worry is that there\u2019s a shortage of organizations that fit the ethos of the employees who stand to benefit from this year\u2019s mega-I.P.O.s.<\/p>\n \u201cAt the scale we\u2019re talking about, it\u2019s hundreds of Arc Institutes or thousands of Institutes for Progress,\u201d she said, citing two philanthropic organizations. \u201cIt\u2019s sort of an abundance story.\u201d<\/p>\n Giving not guaranteed<\/p>\n Many employees of these leading A.I. labs want to enjoy their newfound wealth for at least a few years (even if it\u2019s on paper) before committing to giving a chunk of it away.<\/p>\n \u201cThey\u2019re having a harder time grasping what the dollar value actually means in their lives,\u201d said Frank Alvarez, a financial consultant at Tidemark Financial Partners. He has 26 clients who work at SpaceX, he said, and also advises employees from Anthropic and OpenAI. <\/p>\n \u201cThe psychological transition of becoming a world steward, rather than an accumulator, is the hardest aspect,\u201d Alvarez added.<\/p>\n But Feldhammer said the best tax strategy was one that began long before a company went public. \u201cThere are a lot of ways to drastically change your estate tax situation long before the company is worth something,\u201d he said.<\/p>\n For example, rapidly appreciating private shares could be placed into a Roth I.R.A. \u2014 and therefore avoid taxes entirely without having to leverage charity.<\/p>\n \u201cIt\u2019s so sad when people come to us when they I.P.O.,\u201d Feldhammer added. \u201cThe economics never really work out such that you\u2019re ahead \u2014 unless you\u2019re charitably minded.\u201d<\/p>\n Sarah Kessler contributed reporting.<\/p>\n A word from Andrew<\/p>\n Good morning. Andrew here. We may be on the cusp of a $100 billion giveaway: With SpaceX and Anthropic creating a new class of wealth, the nonprofit world is salivating. DealBook contributor Ian Frisch goes inside the frenzy. Also: Lauren Hirsch discusses the latest implications of the regulatory battle over the proposed merger of Paramount with Warner Bros. Discovery. And get out your popcorn for this week\u2019s quiz. <\/p>\n IN CASE YOU MISSED IT<\/p>\n President Trump\u2019s tariffs changed again. As a previous round of tariffs expired, new levies of at least 10 percent<\/a> went into effect on Friday for 80 countries. The tariffs were issued under a provision that targets allegations of lax enforcement of forced labor bans, and experts say they\u2019re more durable than the tariffs that the Supreme Court struck down in February. Within hours, small businesses challenged the legality of the tariffs<\/a>.<\/p>\n Inflation fears are on the rise. The new tariffs, plus rising oil prices amid the war with Iran, have reignited worries about rising prices. The yield on the 10-year Treasury note, a rate that underpins most commercial loans, topped 4.7 percent on Thursday before retreating on Friday.<\/p>\n Google\u2019s A.I. spending spree worried investors. The company reported $112 billion<\/a> in quarterly profit, up fourfold from a year earlier. But it also raised its capex forecast for the year to as much as $205 billion and reported negative quarterly free cash flow, prompting a big drop in its stock price<\/a>.<\/p>\n More big deals: New York\u2019s mayor, Zohran Mamdani, appointed<\/a> Lina Khan, a former chair of the Federal Trade Commission, and Anthony Shorris, a partner at McKinsey & Company, to lead the city\u2019s Economic Development Corporation. OpenAI models went rogue<\/a> and hacked into the digital library Hugging Face. And LeBron James<\/a> will sign with the Philadelphia 76ers for $4 million a year.<\/p>\n A wrench in the Paramount deal<\/p>\n The proposed $111 billion merger of Paramount and Warner Bros. Discovery hit a bump this week when a federal judge paused the deal<\/a> to consider a lawsuit brought by 12 states that argue the deal violates antitrust laws.<\/p>\n The merger has cleared most other major roadblocks, including the Justice Department<\/a> and the European Commission<\/a>. The interference by attorneys general is the latest test of a new trend as states try to expand their role in antitrust enforcement.<\/p>\n DealBook asked Lauren Hirsch, who has been covering Paramount\u2019s deal for Warner Bros. Discovery for The Times, how the shift is changing dealmaking and what is next for the blockbuster merger.<\/p>\n Are attorneys general becoming a bigger factor as companies consider deals?<\/p>\n A dealmaker recently described the current antitrust landscape to me as \u201cWhac-a-Mole.\u201d Federal enforcers are now more willing to usher deals through, but state attorneys general are increasingly looking to fill that gap.<\/p>\n Just this week, the Justice Department announced it is speeding its review of certain deals and reducing the amount of information they request. And then you have states like Colorado, which have created new paperwork requirements for proposed mergers.<\/p>\n The key question is how far states can take matters into their own hands, because they have vastly fewer resources than the federal government. (Some states, like California, have been looking to expand their budgets<\/a> for antitrust enforcement.)<\/p>\n The success of the states in going up against Paramount will be a huge test of that.<\/p>\n Are dealmakers doing anything differently as a result of attorney general scrutiny?<\/p>\n If a deal involves a company that is particularly high profile or strikes a particular political nerve, like affordability, they know it is likely to attract attention from the states.<\/p>\n They\u2019re also careful to not draw focus from the states while they\u2019re pursuing federal approval. A number of deals, including HPE\u2019s acquisition of Juniper, were criticized<\/a> for interference of lobbyists and political appointees.<\/p>\n Many companies are now making an extra effort to get support from staffers at the Justice Department \u2014 or at least appear they got support. David Ellison had a long meeting with the Justice Department that included staffers about the proposed deal in May. But attorneys general pounced after The Wall Street Journal reported that the Justice Department\u2019s decision to approve the deal took staffers by surprise.<\/p>\n Paramount has agreed to pay Warner Bros. shareholders $650 million for each quarter the deal doesn\u2019t close, starting in October. Is there a point at which Paramount gives up rather than keeps paying?<\/p>\n To start with, Paramount is contractually obligated to use its best efforts to get the deal closed. And the deal is existential for Paramount \u2014 they need the scale that WBD provides them. <\/p>\n Sometimes, long delays in closing a deal can create pressure from the investors who have committed to finance it. But, in this case, David\u2019s father, Larry Ellison, has personally guaranteed the deal. (Still, it is worth noting Oracle, the primary source of Larry\u2019s wealth, has been under significant pressure over its data center costs.)<\/p>\n And walking away has costs, too: Paramount agreed to pay Warner Bros. Discovery $7 billion if the deal falls apart over regulatory concerns. Not to mention it already paid Netflix $2.8 billion to make it go away.<\/p>\n What happens next?<\/p>\n Yesterday brought a curveball: Paramount said it had agreed to halt the deal<\/a> until June 2027 at the latest, while they proceed with a full trial before the federal Judge. (The merger agreement expires if the deal has not closed by June 4, 2027.) <\/p>\n The big question is why Paramount made that decision. Paramount cast it as a win, calling it \u201cthe fastest and clearest way\u201d to make its case in a full-fledged trial. But some on Wall Street are wondering whether Paramount opted to move straight to a trial, rather than facing the possibility of losing an Aug. 3 hearing over whether the judge would impose a court-mandated pause <\/p>\n If Paramount loses, it could still appeal. And there\u2019s always the possibility that the two sides strike some sort agreement to avert a lengthy delay, though California has indicated it wants significant concessions. <\/p>\n Up next: scheduling the trial. <\/p>\n A new bucket of revenue<\/p>\n This question comes from a recent Times article. Click an answer to see if you\u2019re right. (The link will be free.)<\/p>\n \u201cThe Odyssey\u201d sold $124.5 million worth of tickets<\/a> last weekend, making it the biggest domestic opening of the year for a live-action film. And that doesn\u2019t even include the revenue from \u2026 popcorn buckets.<\/p>\n These ornate special-edition snack holders, which cost as much as $70, have become a surprisingly strong revenue generator for movie theaters.<\/p>\n How much revenue does AMC Theatres expect to generate from popcorn buckets this year?<\/p>\n Thanks for reading! We\u2019ll see you Monday.<\/p>\n We\u2019d like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com<\/a>.<\/p>\n Follow DealBook on Instagram: @nytdealbook<\/a><\/p>\n