{"id":4544,"date":"2025-02-11T19:35:35","date_gmt":"2025-02-11T19:35:35","guid":{"rendered":"https:\/\/fusionmindlabs.com\/blogs\/musks-97-4b-bid-risks-openais-for-profit-plans\/"},"modified":"2025-02-11T19:35:35","modified_gmt":"2025-02-11T19:35:35","slug":"musks-97-4b-bid-risks-openais-for-profit-plans","status":"publish","type":"post","link":"https:\/\/fusionmindlabs.com\/blogs\/musks-97-4b-bid-risks-openais-for-profit-plans\/","title":{"rendered":"Musk’s $97.4B bid risks OpenAI’s for-profit plans"},"content":{"rendered":"\n<\/p>\n
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On Monday, Elon Musk, the world\u2019s richest man, offered<\/a> to buy the nonprofit organization that effectively governs OpenAI for $97.4 billion. The unsolicited buyout would be financed by Musk\u2019s AI company, xAI, and a consortium of outside investors<\/a>, per a letter sent to California and Delaware\u2019s attorneys general.<\/p>\n

OpenAI CEO Sam Altman quickly dismissed Musk\u2019s bid<\/a>, and took it as a chance to publicly address the issue. <\/p>\n

\u201cNo thank you, but we will buy Twitter for $9.74 billion if you want,\u201d Altman wrote in a post on X<\/a> just hours after reports emerged of Musk\u2019s offer for OpenAI. Musk owns X, the social network formerly known as Twitter; he paid roughly $44 billion for it in October 2022. <\/p>\n

The two have a history. Musk is an OpenAI co-founder, and both he and xAI are currently involved in a lawsuit that alleges that OpenAI engaged in anticompetitive behavior, among other things.<\/p>\n

But Altman\u2019s rejection of the $97.4 billion takeover offer is more complicated than simply saying \u201cno thanks,\u201d according to corporate governance experts who spoke with TechCrunch.<\/p>\n

Stalling OpenAI\u2019s non-profit conversion<\/h2>\n
\"OpenAI
NEW YORK, NEW YORK \u2013 DECEMBER 04: OpenAI CEO Sam Altman visits \u201cMaking Money With Charles Payne\u201d at Fox Business Network Studios on December 04, 2024 in New York City. (Photo by Mike Coppola\/Getty Images)<\/span>Mike Coppola \/ Getty Images<\/span><\/figcaption><\/figure>\n

For background, OpenAI was founded as a nonprofit before transitioning to a \u201ccapped-profit\u201d structure in 2019. The nonprofit is the sole controlling shareholder of the capped-profit OpenAI corporation, which retains formal fiduciary responsibility to the nonprofit\u2019s charter. <\/p>\n

OpenAI is now in the process of restructuring \u2013 this time to a traditional for-profit company, specifically a public benefit corporation \u2013 in a bid to raise much more capital. But Musk \u2013 who is notorious for drowning his enemies in legal troubles \u2013 may have stalled the transition and raised the price of OpenAI\u2019s nonprofit with his bid.<\/p>\n

Delaware<\/a> and California\u2019s attorneys general have requested more information from the ChatGPT maker about its plans to convert to a for-profit benefit corporation. The situation also forces it to consider outside bids seriously. <\/p>\n

OpenAI\u2019s board will almost certainly reject the bid, but Musk has been setting the stage for future legal and regulatory battles. He\u2019s already attempting to stall OpenAI\u2019s for-profit conversion via an injunction, for instance. The bid appears to be an alternative offer, of sorts. <\/p>\n

Now, OpenAI\u2019s board will have to demonstrate that it\u2019s not underselling OpenAI\u2019s nonprofit by handing the nonprofit\u2019s assets, including IP from OpenAI\u2019s proprietary research, to an insider (e.g. Sam Altman) for a steep discount.<\/p>\n

\u201cMusk is throwing a spanner into the works,\u201d said Stephen Diamond, a lawyer who represented Musk\u2019s opponents in corporate governance battles at Tesla, in an interview with TechCrunch. \u201cHe\u2019s exploiting the fiduciary obligation of the nonprofit board to not undersell the asset. [Musk\u2019s bid] is something OpenAI has to pay attention to.\u201d<\/p>\n

OpenAI is said to be gearing up for a funding round that would value its for-profit arm at $260 billion. The Information reports that OpenAI\u2019s nonprofit is slated to get a 25% stake in OpenAI\u2019s for-profit.<\/p>\n

With his bid, Musk has signaled there\u2019s at least one group of investors willing to pay a sizable premium for OpenAI\u2019s nonprofit wing. That puts the board of directors in a tight spot. <\/p>\n

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Grounds for rejection<\/h2>\n

Still, just because Musk threw out an eye-popping offer doesn\u2019t mean that OpenAI\u2019s nonprofit has to accept. <\/p>\n

Corporate law gives tremendous authority to incumbent boards to protect against unsolicited takeover bids, according to David Yosifon, a Santa Clara University professor of corporate governance law.<\/p>\n

OpenAI could make the case that Musk\u2019s bid is a hostile takeover attempt given that Musk and Altman aren\u2019t the best of friends. <\/p>\n

The company could also argue that Musk\u2019s offer isn\u2019t credible because OpenAI is already in the midst of a corporate restructuring process.<\/p>\n

Another approach OpenAI could take would be challenging Musk on whether he has the funds. As The New York Times notes, Musk\u2019s wealth is largely tied to his Tesla stock, meaning that Musk\u2019s investment partners would have to supply much of the $97.4 billion total.<\/p>\n

OpenAI\u2019s board may need to review Musk\u2019s offer to fully assess whether it aligns with the nonprofit\u2019s mission, not just specific financial or strategic goals, according to Scott Curran, the former General Counsel to the Clinton Foundation. That means Musk\u2019s offer could be weighed against OpenAI\u2019s mission: \u201cto ensure that artificial general intelligence \u2013 AI systems that are generally smarter than humans \u2013 benefits all of humanity.\u201d<\/p>\n

\u201cWhen Altman posted that response [on X], that was probably done without legal guidance,\u201d Yosifon said. \u201cIt\u2019s not good for a regulator to see that kind of dismissive, knee-jerk tweet.\u201d<\/p>\n

Raising the value for OpenAI assets<\/h2>\n

The board is likely to side with Altman. Nearly all the directors joined after Altman was briefly fired, then rehired, by the nonprofit\u2019s board in late 2023. Altman himself is also a board member.<\/p>\n

If nothing else, Musk\u2019s bid may raise the potential market value of the OpenAI nonprofit\u2019s assets. That could force OpenAI to raise more capital than it originally anticipated, and complicate talks with the startup\u2019s existing backers. It could also dilute the value of stakes held by OpenAI investors in the for-profit arm, including major partners such as Microsoft. <\/p>\n

That\u2019s sure to anger Altman, who\u2019s been working with investors for months to determine how to fairly compensate the nonprofit.<\/p>\n

The gist is: OpenAI\u2019s corporate restructuring plans just got more complex.<\/p>\n<\/div>\n\n
Source Link<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

On Monday, Elon Musk, the world\u2019s richest man, offered to buy the nonprofit organization that effectively governs OpenAI for $97.4 billion. The unsolicited buyout would be financed by Musk\u2019s AI…<\/p>\n","protected":false},"author":0,"featured_media":4545,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[65,424,176,1303,164,434],"class_list":["post-4544","post","type-post","status-publish","format-standard","has-post-thumbnail","category-news","tag-ai","tag-chatgpt","tag-elon-musk","tag-nonprofit","tag-openai","tag-sam-altman"],"jetpack_featured_media_url":"https:\/\/fusionmindlabs.com\/blogs\/wp-content\/uploads\/sites\/9\/2025\/02\/OpenAI-logo-symmetry.jpg","_links":{"self":[{"href":"https:\/\/fusionmindlabs.com\/blogs\/wp-json\/wp\/v2\/posts\/4544","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fusionmindlabs.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fusionmindlabs.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/fusionmindlabs.com\/blogs\/wp-json\/wp\/v2\/comments?post=4544"}],"version-history":[{"count":0,"href":"https:\/\/fusionmindlabs.com\/blogs\/wp-json\/wp\/v2\/posts\/4544\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/fusionmindlabs.com\/blogs\/wp-json\/wp\/v2\/media\/4545"}],"wp:attachment":[{"href":"https:\/\/fusionmindlabs.com\/blogs\/wp-json\/wp\/v2\/media?parent=4544"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fusionmindlabs.com\/blogs\/wp-json\/wp\/v2\/categories?post=4544"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fusionmindlabs.com\/blogs\/wp-json\/wp\/v2\/tags?post=4544"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}