A consortium of investors, spearheaded by Elon Musk, has proposed a substantial offer of approximately $97.4 billion to acquire the nonprofit organization that oversees OpenAI. This move intensifies the ongoing conflict with OpenAI, the artificial intelligence company that Musk helped establish nearly ten years ago.
Musk, along with his AI firm xAI and several investment partners, aims to regain governance of the ChatGPT creator in order to restore its original purpose as a nonprofit research entity. This information was confirmed by Musk’s lawyer, Marc Toberoff.
In response to the unexpected proposal, OpenAI’s CEO Sam Altman swiftly dismissed the bid via Musk’s social media platform, X, jokingly offering that they can purchase Twitter for $9.74 billion instead. To note, Musk acquired Twitter, which has since been rebranded to X, for $44 billion in 2022.
Musk and Altman have experienced a tumultuous relationship since parting ways back in 2018 when Musk resigned from OpenAI’s board. Their professional rivalry led to disagreements over the future leadership of the organization, marking the beginning of a protracted feud regarding the company’s strategic direction.
Having been an early investor and board member, Musk accused OpenAI of deviating from its founding goals of promoting public welfare through non-profit research. In pursuing legal action, he filed a lawsuit against them both in state and federal courts last year, claiming they had lost sight of their mission to safely develop advanced AI for the greater good. Musk reportedly invested $45 million in OpenAI during its early years until parting ways in 2018.
The success of ChatGPT in recent years has catapulted OpenAI to international prominence and opened up lucrative revenue streams, further escalating internal conflicts over the organization’s future. Notably, Altman was dismissed by the nonprofit board in late 2023 but returned shortly after with a newly assembled board.
Currently, OpenAI functions as a rapidly expanding business while still being governed by a nonprofit board committed to its charitable mission. The organization has signaled plans to transform its corporate structure, however, such transitions pose legal complexities. Tax regulations require that funds or assets contributed to a tax-exempt organization remain within the charitable domain.
If OpenAI were to switch to a for-profit model, it would necessitate a conversion process that mandates the for-profit entity compensate another charity at fair market value for any assets. Industry experts contend that even with the potential continuation of a nonprofit OpenAI, it must be reimbursed fairly for any of its assets that are transferred to its new for-profit divisions.
Last week, attorneys representing OpenAI and Musk faced off in a federal court in California, where a judge examined Musk’s appeal for a court injunction to halt OpenAI’s movement towards a profit-oriented model. U.S. District Judge Yvonne Gonzalez Rogers has yet to issue a ruling but characterizes Musk’s assertions as a “stretch,” noting his claims of irreparable harm may not hold sufficient weight.
However, the judge did express skepticism about OpenAI’s business dealings, particularly with its partner Microsoft, and indicated that the case may proceed to trial as early as next year for a jury assessment.
Musk’s investor group, which also includes other firms such as Baron Capital Group and Valor Management, among others, supports this bid. Toberoff has stated that if Altman and the current board of OpenAI are committed to becoming a for-profit corporation, it is crucial to ensure that the charity receives adequate compensation for the control it loses over what he describes as transformative technology.
Additionally, Musk’s lawyer has reached out to the attorneys general in California and Delaware requesting them to oversee the process of ensuring that any transaction involving OpenAI’s charitable assets is conducted transparently and at fair market value.
In his letter, Toberoff has sought clarification on how competitive bidding will be structured to guarantee fair market value is realized, reinforcing the importance of protecting the public’s interests in this transition.
