Super Investor Sam Altman’s Interests Collide in a Nuclear Merger

This summer it revealed a match: a nuclear-fission startup chaired and partly owned by Altman that is years away from generating revenue.

The deal came at Altman’s suggestion, recent filings show.

The planned tie-up between special-purpose acquisition company AltC Acquisition and aspiring nuclear reactor maker Oklo is set to work out well for Altman. The chief executive of ChatGPT’s parent company, OpenAI, and the former president of venture-capital firm Y Combinator, Altman stands to have a more than 7% stake in the combined company, merger documents filed late last month show. The deal values the company at up to $1.4 billion.

His stake includes about 6.7 million restricted shares from AltC, which could have been worthless if it hadn’t found a merger target by this month, and more than 3.4 million shares from his existing holding in Oklo. Based on AltC’s $10-a-share price in its initial listing, the deal values Altman’s existing Oklo stake at more than 30 times the price he paid in an earlier funding round.

A deal involving two companies backed by the same investor need not be problematic, so long as ties are disclosed and companies follow their own policies on related-party transactions. But such deals tend to raise concerns about potential conflicts of interest, since two companies that effectively report to the same person are negotiating with each other.

Similar deals have cropped up repeatedly in the SPAC wave that has taken hundreds of companies public in the past four years. They mark one of several ways in which the Wall Street tool pushes the norms of corporate governance. SPACs have been criticized by regulators and investors for frequent poor performance and terms that benefit management over shareholders.

A blank-check company could theoretically pick a merger target backed by its management instead of a better-qualified alternative, said Michael Klausner, a Stanford University professor who studies SPACs.

“It’s not a good sign," he said of such conflicts. Still, he said, they are a marginal negative and the overall structure is “the real problem with all SPACs."

The filings also show that Altman spoke about the proposed merger with Oklo chief Jacob DeWitte in December 2022 and discussed a prospective valuation.

That phone call came two months after Altman initially suggested his partners at AltC pursue the deal, and after AltC had already made several proposals to Oklo. The following month, after the two sides tentatively agreed in writing to pursue a deal, Altman recused himself from further involvement.

AltC was launched in 2021 by Altman and Michael Klein, a former Citigroup banker turned SPAC deal maker. The management group put $15 million into the SPAC and raised $500 million from investors.

From the start, it was open about the potential for conflicts, saying it could merge with a company part-owned by Klein or Altman, who had stakes in hundreds of startups through his involvement at Y Combinator. Altman’s experience and wide ownership of startups featured heavily in a presentation to potential investors in the SPAC.

From the get-go, Klein told investors in July, “we intended to work with Sam to find a company that he believed in."

AltC aimed to be investor-friendly by SPAC standards. It boasted a board with former Goldman Sachs President John Thornton, Harvard management professor Frances Frei and media investor and former journalist Peter Lattman. Management also didn’t receive warrants—instruments that give investors a right to buy more shares in the future and that are a common feature in SPAC deals.

The shares from AltC won’t be available for Altman or other SPAC management to immediately sell, and they only free up when the stock price repeatedly reaches various triggers between the listing price of $10 and $16.

The SPAC looked closely at more than 12 potential targets, filings show, but didn’t have advanced discussions with any until after Altman suggested Oklo to Klein in October 2022.

Altman had long been a big advocate of the Santa Clara, Calif.-based startup, which was planning a new type of modular, small-scale nuclear-power reactor a fraction of the size of a standard plant. He has said he recruited the company to Y Combinator and invested personally. He has been its chairman since 2015.

The company is far smaller and earlier-stage than most venture-backed companies that go public. It had 48 employees as of June and hasn’t raised large sums to date: It has disclosed raising about $50 million in various forms of venture-capital funding.

Its designs haven’t yet been approved by the U.S. nuclear regulator—with an application rejected last year. Oklo doesn’t plan to deploy its first commercial reactor until at least 2026, and expects to continue losing money “for the foreseeable future."

That contrasts with the SPAC’s stated investment criteria at its launch in 2021, when it said it was seeking a cash-generating company or one with “near-term potential" for “strong and sustainable free cash flow."

Oklo in the past year has announced a set of nonbinding commitments, including tentative plans for two new plants in Ohio and a small reactor at an Air Force base in Alaska.

Should the merger go through, Altman is slated to stay on its board.

In the July investor call, he expressed confidence about Oklo’s prospects, saying that he had looked at many alternative companies. Its plant design was “by far the most exciting, it is a combination of simple and modern," he said. “I’m excited about Oklo."

Write to Eliot Brown at Eliot.Brown@wsj.com