Musk will pull OpenAI bid if ChatGPT maker remains non-profit, lawyers say

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By Shivani Tanna, Aditya Soni and Krystal Hu

(Reuters) -A consortium led by Elon Musk will withdraw its $97.4-billion bid for OpenAI’s non-profit arm if the ChatGPT maker drops plans to become a for-profit entity, the billionaire’s lawyers said in a court filing on Wednesday. 

Musk has been trying to block the startup he co-founded and later left from becoming a for-profit firm, a move OpenAI argues is crucial for it to secure more capital and compete in the AI race.

“If (the) OpenAI board is prepared to preserve the charity’s mission and stipulate to take the ‘for-sale’ sign off its assets by halting its conversion, Musk will withdraw the bid,” the filing in U.S. District Court, Northern District of California, said. 

If not, “the charity must be compensated by what an arms-length buyer will pay for its assets.” 

Musk’s “serious offer” was to further the charity’s mission, the filing added.    

Musk owns a competing AI startup, xAI, launched in 2023.

OpenAI and Musk, CEO of Tesla and social media platform X, did not respond to requests for comment.

OpenAI’s board has received the bid, after an initial snafu of not seeing it 24 hours after Musk’s group said they sent the bid over, a source familiar with the matter told Reuters. 

Sam Altman, CEO of OpenAI, said this week the non-profit that controls the company was not for sale, calling the bid “ridiculous.”

The board plans to reject it because its non-profit is not for sale, and the non-profit board’s mission is to ensure AI benefits humanity, the source added. 

OpenAI said in its own filing with the same court on Wednesday that Musk’s bid to buy OpenAI contradicts the arguments he is making in court that the startup’s assets cannot be transferred for private gain, calling it “an improper bid to undermine a competitor.”

Musk co-founded OpenAI with Altman in 2015 as a non-profit, but left in 2018 before the company took off due to differences over its direction and funding sources. Altman then became CEO of OpenAI and launched a for-profit unit within the startup to secure funding from investors such as Microsoft.

Altman is now working on a plan to restructure the core business into a for-profit firm that will no longer be controlled by its non-profit board. The non-profit will, however, continue to exist and own a stake in the for-profit company. Musk has sued to prevent this transition.

Several analysts have said regardless of the outcome, the bid could complicate OpenAI’s efforts to turn into a for-profit company as it may set a high floor value for the non-profit that controls the startup. 

Questions have been rising on whether OpenAI would allocate its assets to the non-profit arm fairly, since Reuters first reported in September its plans for the change in structure.

SoftBank Group is in talks to lead a funding round of up to $40 billion in OpenAI at a valuation of $300 billion, including the new funds, Reuters reported in January, meaning the non-profit could own a stake with significant value in the company.

(Reporting by Shivani Tanna and Aditya Soni in Bengaluru, Krystal Hu in New York; Editing by Savio D’Souza, Devika Syamnath and Rod Nickel)