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Elon Musk's lawyer called on attorneys general in California and Delaware to force OpenAI to auction off a significant stake in its business, intensifying a bitter battle with the company's CEO Sam Altman.
In a letter to top US law officials, seen by the Financial Times, Musk's lawyer, Mark Toberoff, said he was writing on behalf of major AI investors who wanted to participate in an open and competitive bidding process to buy the project. OpenAI a class.
OpenAI had no plans for such an auction, according to a person familiar with the ChatGPT maker's thinking. They added that Musk's camp simply “wants more chaos.”
This highly unusual effort comes on the heels of lawsuits she has filed Musk Last year because OpenAI, which was founded as a non-profit organization dedicated to ensuring the benefit of artificial intelligence for humanity, attempted to restructure as a for-profit company.
Musk co-founded OpenAI with Altman and… Nine others In 2015, he was the most important early financier before leaving the board in 2018 after falling out with Altman.
OpenAI launched a for-profit subsidiary a year later to raise outside capital, including more than $13 billion to date from its largest backer, Microsoft. However, the nonprofit entity, along with employees and investors, currently owns that for-profit subsidiary.
OpenAI is trying to become a public benefit corporation, a type of for-profit entity committed to improving society. The company has proposed that the nonprofit's “significant interest” in the existing for-profit corporation would take the form of shares in the People's Bank of China at a fair valuation, which it says will be determined by independent financial advisers.
The General Budget Committee will manage and monitor OpenAI's operations and business, while the nonprofit “will pursue philanthropic initiatives in sectors such as healthcare, education, and science,” the company wrote in a blog post in December.
In his letter, Musk's lawyer urged prosecutors to allow outside investors to bid for the nonprofit's stake in OpenAI. If successful, this could allow an outside investor to take a significant position in the startup and exercise control over it.
The proposed conversion to PBC would also mean that the non-profit entity would relinquish management of OpenAI's business and operations. One person familiar with the situation said that these forces could be worth billions of dollars.
In the letter, Toberoff suggested that an auction is the only way to ensure the nonprofit gets maximum value for its assets and upholds its fiduciary duties.
The nonprofit's stake in the public benefit corporation is likely worth tens of billions of dollars, according to a person familiar with the matter.
The Tesla boss and a confidant of US President-elect Donald Trump had previously accused Altman of “deception of Shakespearean proportions”, claiming that OpenAI and Microsoft had strayed from the startup's original mission.
OpenAI said in December that converting it to a budget-based foundation would “result in one of the best-resourced nonprofits in history” and would multiply donations made by early backers — including Musk — “manyfold.”
The company's complex governance came under scrutiny when Altman was briefly ousted by the nonprofit's board in November 2023, and the company has since been considering more traditional arrangements.
Musk, who founded his artificial intelligence startup xAI in 2023, has recently stepped up his efforts to derail the OpenAI conversion.
In November, he sought to derail the process by requesting a preliminary injunction in California. Meta also threw its weight behind the lawsuit, which is Musk's fourth lawsuit against OpenAI.
In legal filings from November, Musk's team wrote: “For OpenAI and Microsoft to jointly exploit Musk's donations so they can build a for-profit monopoly, one that is now specifically targeting XAI, is too much to bear.”
Kathleen Jennings, the attorney general of Delaware — where OpenAI was founded — has since said her office is responsible for ensuring that the OpenAI transfer was in the public interest, and determining whether the deal was at a fair price.
Members of Musk's camp are concerned about Delaware authorities after the state judge She rejected a proposed $56 billion payroll package To a Tesla director last month — read that as a rebuke of his efforts to prevent the conversion, and concern about hastening it. They also argued that OpenAI's PBC conversion should happen in California, where the company is headquartered.
In a legal filing last week, Musk's lawyers said Delaware's handling of the matter “does not inspire confidence.”
OpenAI committed to becoming a public benefit corporation within two years as part of a $6.6 billion funding round in October, giving it a valuation of $157 billion. If you fail to do so, investors will be able to get their money back.
There are a number of issues yet to be resolved by OpenAI, including negotiating the value of Microsoft's investment in PBC. The transition was not imminent and would likely take months, according to the person familiar with the company's thinking.
OpenAI declined to comment. Attorneys general for California and Delaware did not immediately respond to a request for comment.
