Elon Musk’s $97.4 Billion Bid to Acquire OpenAI’s Nonprofit Arm

Elon Musk, along with a consortium of investors, has launched a $97.4 billion proposal to take over the nonprofit sector of OpenAI, heightening his continuous feud with OpenAI’s CEO, Sam Altman. As reported by WSJ, the proposal, delivered by Musk’s attorney, Marc Toberoff, seeks to redefine the future of OpenAI and confronts Altman’s strategy of turning the AI organisation into a for-profit entity.

The Background of Musk’s Involvement with OpenAI

Musk, who was a co-founder of OpenAI in 2015 before his departure, has openly critiqued the organisation’s shift towards commercialisation. Musk has expressed that it is essential for OpenAI to revert to its original mission of being an open-source and safety-oriented force for good. He intends to ensure this vision is realised. In response, Altman took to X, formerly known as Twitter, to quip, “no thank you but we will buy Twitter for $9.74 billion if you want,” cleverly modifying Musk’s bid by adjusting the decimal point.

OpenAI’s Transition to For-Profit Structure

Initially established as a nonprofit, OpenAI launched a for-profit subsidiary in 2019 to attract capital from major companies such as Microsoft. Altman’s plan includes spinning off the nonprofit division while retaining an ownership stake in the emerging company. Musk’s offer raises critical questions surrounding how the nonprofit assets are valued, possibly granting him or his investors significant influence.

Investors and Potential Mergers

The takeover bid is spearheaded by Musk’s AI venture, xAI, with substantial support from leading investors including Valor Equity Partners, Baron Capital, Atreides Management, Vy Capital, and the venture firm 8VC, co-founded by Joe Lonsdale of Palantir. Additionally, Ari Emanuel, a prominent Hollywood executive, is backing the acquisition through his investment fund. Should the bid be successful, Musk could integrate xAI with OpenAI, profoundly affecting the competitive dynamics within the AI sector.

Musk’s Legal Actions Against OpenAI

Alongside his bid, Musk has previously engaged in legal disputes with OpenAI, alleging that it has deviated from its nonprofit core by forging close ties with Microsoft. He has sought regulatory scrutiny in California and Delaware concerning the valuation practices of OpenAI, indicating that the nonprofit’s assets may be undervalued in the transition to a for-profit format. OpenAI has characterised Musk’s legal propositions as unfounded and remains dedicated to guaranteeing that the nonprofit arm receives fair value during restructuring.

Current Negotiations Involving OpenAI

Currently, OpenAI is navigating intricate negotiations with Microsoft and other investors to determine equity distribution within the new for-profit model. Japanese technology conglomerate SoftBank is also in talks to potentially invest up to $25 billion in OpenAI as part of a funding round that could value the organisation at as much as $300 billion. With Musk’s acquisition proposal, OpenAI’s leadership is confronted with a critical choice that could determine the future direction of one of the most impactful AI companies globally.