Elon Musk, along with a group of investors, has made a $97.4 billion bid to acquire the nonprofit arm of OpenAI, intensifying his ongoing rivalry with OpenAI CEO Sam Altman. According to a report by WSJ, the offer, submitted by Musk's lawyer Marc Toberoff, aims to reshape OpenAI's future and challenges Altman’s transition plans for the AI company into a for-profit corporation.
Musk, who co-founded OpenAI in 2015 and later departed, has been critical of its commercialisation shift. He stated, "It's time for OpenAI to return to the open-source, safety-focused force for good it once was. We will make sure that happens." Altman responded on X, formerly Twitter, with a retort, "no thank you but we will buy twitter for $9.74 billion if you want," playfully adjusting Musk’s bid by moving the decimal point.
OpenAI was initially founded as a nonprofit and later established a for-profit subsidiary in 2019 to attract investments from firms like Microsoft. Altman plans to spin off the nonprofit arm while maintaining an equity stake in the new company. Musk's bid raises questions about the valuation of the nonprofit’s assets, potentially giving him or his investors a controlling interest.
The bid is led by Musk's AI company, xAI, with backing from major investors, including Valor Equity Partners, Baron Capital, Atreides Management, Vy Capital, and venture firm 8VC, led by Palantir co-founder Joe Lonsdale. Hollywood executive Ari Emanuel is also supporting the deal through his investment fund. If successful, Musk could merge xAI with OpenAI, significantly impacting the competitive landscape of the AI industry.
Musk has already engaged in legal battles with OpenAI, accusing it of straying from its nonprofit mission by collaborating too closely with Microsoft. He has also sought regulatory reviews in California and Delaware concerning OpenAI’s valuation process, suggesting that its nonprofit arm might be undervalued during the transition to a for-profit model. OpenAI has dismissed Musk's legal claims as unfounded and remains committed to ensuring the nonprofit arm receives its due value in the restructuring.
Currently, OpenAI is in complex negotiations with Microsoft and other investors regarding equity distribution in the new for-profit entity. Japanese tech giant SoftBank is also in discussions to invest up to $25 billion in OpenAI as part of a funding round that could value the company at up to $300 billion. With Musk's takeover bid, OpenAI's leadership faces a critical decision that could influence the future trajectory of one of the world's most influential AI companies.
Jaspreet Bindra, Co-founder and CEO of AI&Beyond said, "Musk’s bid for OpenAI’s non-profit arm is a bold and disruptive power play that challenges the very foundation of its governance structure. While unlikely to succeed, it forces OpenAI to reassess the valuation of its non-profit entity, which holds controlling power over the for-profit arm. Musk’s offer values the non-profit as equivalent to a 51% stake, effectively raising the stakes and threatening to dilute key investors like Microsoft—just as OpenAI is reportedly raising fresh capital at a $300 billion valuation."