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Elon Musk’s lawyer has asked the California and Delaware attorneys-general to auction off a large stake in the company’s business, intensifying a bitter battle with the company’s CEO, Sam Altman.
Musk’s lawyer, Mark Toberoff, said in a letter to the state’s top legal officials seen by the Financial Times that he is writing on behalf of large artificial intelligence investors who want to participate in an open and competitive bidding process. Open AI share
OpenAI had no plans for such an auction, according to a person with knowledge of ChatGPT’s thinking. Musk’s camp simply “want more chaos,” he added.
The most unusual effort followed the lawsuits. Musk OpenAI, which was founded as a non-profit organization to ensure the human benefit of AI, has since attempted to restructure as a for-profit company last year.
Musk co-founded Open AI with Altman Nine others In the year He was the most important early funder in 2015, and in 2018, before resigning from the board after falling out with Altman.
OpenAI has launched a for-profit company a year after raising capital, including more than $13 billion from its biggest 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 proposed that the not-for-profit’s “significant interest” in PBC take the form of shares at a fair valuation, which it said would be determined by independent financial advisers.
PBC will run and oversee OpenAI’s operations and businesses, while the nonprofit will “promote philanthropic initiatives in areas such as healthcare, education and science,” the company wrote in a December blog.
In the letter, Musk’s lawyer pushed the attorney general to allow foreign investors to compete for the nonprofit’s stake in OpenAI. If successful, that would allow the foreign investor to take a significant position and control over the startup.
The proposed transition to PBC means the non-profit entity will relinquish control over OpenAI’s business and operations. Those forces themselves could cost billions of dollars, a person familiar with the situation said.
In the letter, Toberoff suggested that an auction was the only way to ensure that the nonprofit received the highest value for its assets and maintained its fiduciary duties.
The nonprofit’s stake in the public benefit corporation could be valued at $10 billion, a person familiar with the matter said.
Tesla chief and loyalist US President-elect Donald Trump has accused Altman of “delusion on a Shakespearean scale”, saying Open AI and Microsoft have deviated from the startup’s original mission.
OpenAI’s move to PBC in December “will result in one of the most well-resourced nonprofits in history,” and early supporters — including Musk — will multiply it “many times over.”
In November 2023, Altman was briefly ousted by the nonprofit’s board, which complicated corporate governance, and the company has since been weighing more conventional arrangements.
Musk, who founded his own AI startup xAI in 2023, recently stepped up efforts to disrupt the OpenAI revolution.
In November, he sought to block the process by asking for a preliminary injunction in California. Meta has thrown its weight behind the suit, making it the fourth Musk to launch on OpenAI.
In legal filings in November, Musk’s team wrote: “OpenAI and Microsoft’s joint use of Musk’s donations to build a for-profit monopoly, now specifically targeting xAI, is too much.”
Kathleen Jennings, the attorney general in Delaware — where OpenAI joined — has since been responsible for making sure the OpenAI conversion is in the public interest and determining whether the transaction is affordable.
Members of the Musk camp – beware of Delaware authorities after the state judge He rejected a proposed $56 billion pay package. Read it as a rebuke to Tesla’s boss last month – and worry – about his efforts to block the change. They also argued that OpenAI’s PBC conversion should happen in California, where the company is headquartered.
Musk’s lawyers said in a legal filing last week that Delaware’s handling of the case “does not inspire confidence.”
OpenAI committed to becoming a public benefit corporation within two years as part of a $6.6bn funding round in October, giving it a $157bn valuation. If it fails to do so, investors can get their money back.
There are several issues OpenAI has yet to address, including negotiating the value of Microsoft’s investment in PBC. A person familiar with the company’s thinking said that change was not imminent and could take months.
OpenAI declined to comment. The California and Delaware attorneys-general did not immediately respond to requests for comment.
