OpenAI board unanimously rejects Musk's $97.4 bn proposal to buy company

By Shirin Ghaffary and Rachel Metz

 

OpenAI’s board of directors has formally rejected an offer from a group of investors led by Elon Musk to buy the nonprofit that controls the artificial intelligence company for $97.4 billion.

“OpenAI is not for sale, and the board has unanimously rejected Mr. Musk’s latest attempt to disrupt his competition,” Bret Taylor, OpenAI’s chairman, said in a statement Friday on behalf of the board. 

 

Musk, who co-founded OpenAI a decade ago before going on to launch a rival AI startup, enlisted a group of wealthy allies for an unsolicited cash bid to buy the nonprofit’s assets. Other backers of the proposal included Valor Equity Partners, Baron Capital, Atreides Management, Vy Capital, Joe Lonsdale’s 8VC and Ari Emanuel, through his investment fund. Musk said he hoped to return OpenAI to being “the open-source, safety-focused force for good it once was.” 

The offer was quickly rebuffed earlier this week by OpenAI Chief Executive Officer Sam Altman, who called it a tactic by a competitor to “slow us down” and stressed that the company is “not for sale.” Andrew Nussbaum, a counsel to the OpenAI board, also previously said in a statement that OpenAI was not looking to sell and stressed that the directors’ “sole fiduciary duty” is fulfilling the company’s mission to build more powerful, hypothetical AI systems called artificial general intelligence (AGI) that benefit humanity. “Respectfully,” he said, “it is not up to a competitor to decide what is in the best interests of OpenAI’s mission.” 

 

Marc Toberoff, a lawyer representing the Musk-led investment consortium, said the board’s rejection of the bid comes as “no surprise” because Altman and Taylor had made statements shooting down the bid before the board had reviewed it.

 

“Of course they’re putting the charity’s assets (control of the for-profit enterprise) up for sale. That’s what their “reorganization” is all about. They’re just selling it to themselves at a fraction of what Musk has offered,” Toberoff said Friday in a statement. “Will someone please explain how that benefits ‘all of humanity’?”

 

Musk has repeatedly tried to derail OpenAI’s plans to restructure as a more conventional for-profit business. The billionaire filed two lawsuits against OpenAI for allegedly straying from its founding principles and asked a court to block the ChatGPT maker’s restructuring efforts. A judge recently said she was reluctant to immediately issue such an order in a case pitting “billionaires versus billionaires.”

 

In a court filing following Musk’s bid, OpenAI argued that his offer to buy the company undermines the very claim at the heart of his lawsuit — that its assets can’t be “transferred away” for “private gain.” Musk’s lawyers said in a subsequent legal finding that Musk would withdraw his bid if OpenAI agreed to halt its conversion to a for-profit.

 

“Any potential reorganization of OpenAI will strengthen our nonprofit and its mission to ensure AGI benefits all of humanity,” Taylor said in the statement Friday. 

 

Regardless of the outcome, Musk’s bid is expected to complicate the company’s restructuring process at a time when OpenAI is in talks with SoftBank Group Corp. to raise a massive new funding round at a valuation as high as $300 billion. 

 

Currently, OpenAI has a for-profit subsidiary that is governed by the nonprofit and its board. As part of the planned corporate shift, the company is expected to pay out a fair value for the nonprofit’s assets. Previously, OpenAI said it will compensate the nonprofit in the form of equity.

 

Legal experts have said regulators will be watching for what stake the nonprofit receives. With the $97.4 billion offer, Musk may have just raised the floor for how much OpenAI needs to allocate.

 

“OpenAI’s board is on perfectly solid footing to say no to Musk’s bid,” Robert Bartlett, a professor at the Stanford Law School and co-director of the Rock Center for Corporate Governance, previously told Bloomberg News. “But that doesn’t mean they can ignore the ramifications on what the bid means for valuing the assets of OpenAI’s nonprofit.”

 

If OpenAI assigns a higher value to its nonprofit, that could dilute the equity of OpenAI’s current and future investors.