On Monday, Elon Musk, the world’s wealthiest man, offered to buy the nonprofit that effectively controls Openai for $97.4 billion. The unsolicited acquisition will be funded by a consortium of mask AI company XAI and an outside investor in accordance with a letter sent to the California and Delaware Attorney General.
Openai CEO Sam Altman quickly rejected Musk’s bid and took it as an opportunity to publicly dunk him.
“Thank you, I’ll buy Twitter if necessary for $9.74 billion,” Altman wrote in X’s post hours after Musk’s Openai offer was reported. Musk owns X, a social network previously known as Twitter. He paid about $44 billion in October 2022.
The two have history. Musk is the co-founder of Openai, and both He and Xai are currently involved in lawsuits that claim Openai is engaged in anti-competitive behavior.
But Altman’s rejection of the $97.4 billion acquisition offer is more complicated than simply saying “no,” according to a corporate governance expert who spoke with TechCrunch.
Stalls Openai’s non-profit conversion
In the background, Openai was founded in 2019 as a nonprofit organization before moving into a “capped for-profit” structure. The nonprofit organization is the sole control shareholder of Capped-Profit Openai Corporation, which holds nonprofit liability.
Openai is currently in the process of restructuring into traditional for-profit companies, especially public benefits companies, in particular public benefits companies, in order to raise more capital. But Musk is notorious for owning his enemy in legal troubles – may have stopped the transition and raised the price of the Open Rai nonprofit with his bid.
The Delaware and California Attorney General have requested more information from ChatGPT makers about plans to convert them into for-profit benefits companies. The situation also forces external bids to be seriously considered.
While Openai’s board will almost certainly refuse bids, Musk is setting the stage for future legal and regulatory battles. For example, he is already trying to stop the conversion of Openai’s for-profit organization via an injunction. A bid seems to be some sort of alternative offer.
Currently, Openai’s board of directors does not sell Openai’s nonprofit organizations by handing nonprofit assets, including IP from Openai’s own research, to insiders (Sam Altman) for a sudden discount. It needs to be demonstrated.
In an interview with TechCrunch, Stephen Diamond, the lawyer who represented Musk’s enemy in the battle for corporate governance at Tesla, said: “He exploits the fiduciary duties of the nonprofit committee to keep him below his assets. [Musk’s bid] It’s something Openai must pay attention to. ”
Openai is said to be preparing for a funding round that values its for-profit arm at $260 billion. The information reports that Openai’s nonprofit organization is planning to acquire a 25% stake in Openai’s for-profit organization.
With his bid, Musk shows that at least one investor group is willing to pay a substantial premium to Openai’s nonprofit wing. This will put the board in a small space.
The basis for rejection
Still, just because Musk abandons the eye-opening offer doesn’t mean Openai’s nonprofits have to accept it.
According to David Yoshiffon, a Santa Clara University professor of Corporate Governance Act, the Corporate Governance Act, the Corporate Act gives the current board a great deal of power to protect it from unsolicited purchase bids.
Open can argue that Musk’s bid is a hostile attempt at a takeover, given that Musk and Altman are not their best friends.
You can also argue that Musk’s offer is unreliable as Openai is already in the midst of the corporate restructuring process.
Another approach Openai can take is to challenge Musk about whether he has the funds or not. As the New York Times points out, Musk’s wealth is primarily linked to his Tesla stock. This means that mask investment partners must supply much of the total $97.4 billion.
According to Scott Curran, a former Clinton Foundation adviser, Openai’s board of directors must fully evaluate mask offers, whether they match the mission of the nonprofit, as well as specific financial goals. There may be. In other words, the mask offer can be compared to an open mission to ensure that “AI systems that are generally smarter than humans) benefit all of humanity.
“When Altman posted the response [on X]it was probably done without legal guidance,” Yoshiffon said. “It’s not good for regulators to see such boring kneeling tweets.”
Increase the value of your Openai assets
The board could be Altman’s ally. Altman was temporarily fired by the nonprofit board in late 2023 and later rehired, with almost all supervisors taking part. Altman himself is an executive.
Without anything else, mask bids may increase the potential market value of Openai nonprofit assets. This could force Openai to raise more capital than originally expected, complicating consultations with existing startup supporters. It could also dilute the value of interests Openai investors hold in for-profit personnel, including key partners such as Microsoft.
It certainly is to anger Altman, who has been working with investors for several months to determine how to compensate nonprofits fairly.
The key points are as follows: Openai’s corporate restructuring plan has become even more complicated.
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