Musk's Bid to Control OpenAI Steps Up Pressure on Altman

 

"Elon Musk's offer for the assets of OpenAI could end up costing Sam Altman, whether he takes it or not.

For months, the OpenAI chief executive has been working with investors to determine how to fairly compensate the nonprofit that controls the company as part of a plan to spin it out and make the ChatGPT developer a for-profit venture.

Musk's $97.4 billion offer, with the backing of a consortium of investors, could force OpenAI's board to reassess how it is valuing the nonprofit, which the board said will be fairly compensated in the transaction and own a stake in the for-profit.

The higher the valuation of the nonprofit, the bigger its stake would likely be in the for-profit OpenAI following a conversion.

At the same time, OpenAI is negotiating how much equity Microsoft, its biggest investor, should get in the for-profit company, along with other backers and employees. It is also seeking to raise up to $40 billion of new capital. Investors in that round will likely expect equity when OpenAI becomes a for-profit as well.

Satisfying all those parties was already complicated. If Musk's gambit increases the equity awarded to the nonprofit, it will be even more difficult.

In addition to the negotiations with investors, OpenAI must get approval for its conversion from attorneys general in California, where it is based, and Delaware, where it is incorporated. These officials govern charities and oversee the valuation of the nonprofit's assets during a sale to ensure it is properly compensated.

Altman on Monday rebuffed Musk's overture on X and in a message to employees. "Our structure ensures that no individual can take control of OpenAI," he wrote. "These are tactics to try and weaken us because we are making great progress."

The OpenAI chief said at an AI summit in Paris on Tuesday that Musk was trying to hamper his company's development.

"I think he is probably just trying to slow us down. He obviously is a competitor," Altman told Bloomberg's TV channel. "I wish he would just compete by building a better product, but I think there's been a lot of tactics, many, many lawsuits, all sorts of other crazy stuff, now this."

Bret Taylor, chairman of OpenAI's board, also poured cold water on Musk's offer. "OpenAI's not for sale," he said at The Wall Street Journal's CIO Network Summit on Tuesday. "And our job as a board is to exclusively decide what benefits our mission, and as a consequence I think this is largely a distraction and I think the board is going to continue to exclusively focus on the mission."

Still, some experts said the board might not be able to dismiss the offer out of hand.

"If Elon's is a fair price and the OpenAI nonprofit is empowered to make the decision, it could sell," said Harvey Dale, a professor of nonprofit law at New York University.

The board could reject Musk's bid for reasons beyond money. As a charity, OpenAI's obligation is to fulfill its legal purpose: safely advancing artificial intelligence to benefit humanity.

"The question of the appropriate price is secondary to the question of whether the board should sell the charitable assets at all," said Jill Horwitz, a law professor at the University of California, Los Angeles.

The unsolicited offer ratchets up a long-running feud between Musk and Altman. The pair were co-founders of OpenAI in 2015 and Musk left three years later.

Since the launch of ChatGPT in 2022 led OpenAI to become more business-focused, Musk has criticized Altman for allegedly abandoning their original charitable mission, launched a competing startup called xAI, and filed several lawsuits against the company.

OpenAI has disputed Musk's claims and released documents it said showed Musk previously supported turning OpenAI into a for-profit but walked away because he couldn't get control of it.

Musk's latest move could embroil a sizable swath of the technology industry in the battle between the partners-turned-enemies.

Japanese conglomerate SoftBank is in talks to invest up to $25 billion into OpenAI as part of its current funding round. It is a major contributor to Stargate, an OpenAI-led venture, unveiled the day after President Trump was inaugurated, to build data centers in the U.S.

Microsoft invested nearly $14 billion into the startup. Many of Silicon Valley's most prominent venture firms are invested in OpenAI, Musk's xAI, or both. Wall Street Journal owner News Corp has a content-licensing partnership with OpenAI." [1]

 1. Musk's Bid to Control OpenAI Steps Up Pressure on Altman. Dotan, Tom; Berber, Jin.  Wall Street Journal, Eastern edition; New York, N.Y.. 12 Feb 2025: A1.