Elon Musk Seeks Rapid Increase in Nonprofit OpenAI's Pricing within a Short Timeframe
Elon Musk's shocking bid for OpenAI, the nonprofit controlling AI juggernaut, perfectly served its purpose. Announced as OpenAI CEO Sam Altman and other world leaders gathered in Paris for a global AI summit, Musk's unsolicited $97.4 billion offer cast a spotlight on himself and his attempts to thwart OpenAI's transformation into a for-profit company.
Swiftly, Altman dismissed Musk's offer, insiders suggesting its doomed fate. However, even if the bid fails to materialize, Musk has arguably given Altman a thorny challenge. The non-profit's transition to a commercial entity requires purchasing and becoming a minority shareholder. Previously, reports suggested the non-profit was worth around $40 billion, citing a 25% stake and the company's valuation. Now, Musk's colossal bid has pinned Altman down; as a board member, he faces pressure to sell for Musk's price to avoid appearing to undercut OpenAI.
“If the board doesn't take it, which they almost certainly won’t, then they’ve made clear that they think the assets Musk is trying to buy are worth more than $97 billion,” a source informed Our Website. “So if the for-profit tries to buy them later, the non-profit will have to get more than that – otherwise, the board is likely in breach of their fiduciary duties.”
Fiduciary duties bind non-profit boards, their responsibilities centered on the organization's mission instead of investors. This allows the board to reject Musk's bid if they believe his move would harm the mission. But selling at a lower price would also undermine OpenAI's mission, the source explained. Altman reportedly announced the board's intention to reject the offer, with members including himself, former Salesforce CEO Bret Taylor, Quora CEO Adam D’Angelo, and Instacart CEO Fidji Simo.
Neither OpenAI nor Musk's lawyer responded to our request for comment.
Founded in 2015 by Altman, Musk, and others, OpenAI started as a non-profit. In its early days, the non-profit created a for-profit arm to fundraise and operate like a conventional startup. But the company was still accountable to the non-profit board, dragged into a brief ouster of Altman in 2023 for not being “consistently candid.”
In recent months, Altman's emerged as a vocal proponent of shedding OpenAI's non-profit structure, proposing to transform the for-profit arm into a “public benefit corporation” managing the company's operations and business. The non-profit, in turn, would recruit its own leadership team to pursue charity projects and retain a significant stake in the new corporation at a “fair valuation.”
OpenAI is set to reach a $260 billion valuation after a $40 billion investment from Softbank. Critics question Altman's role, suggesting brokerage on both sides of the deal as a conflict of interest.
Musk's bid escalates scrutiny, potentially attracting the attention of California Attorney General Rob Bonta, wielding power to block a deal undervaluing the non-profit.
Musk's bid marks the latest chapter in their ongoing feud, starting when Musk left OpenAI three years after founding. Since then, Musk's company, xAI, has sued OpenAI twice, alleging it abandoned its mission to develop AI for humanity's benefit. An ex-OpenAI insider called Musk's move "another sad play for attention."
- Elon Musk's company, xAI, has a history of conflict with OpenAI, as evidenced by two lawsuits alleging that OpenAI abandoned its mission to develop AI for humanity's benefit.
- Sam Altman, as a board member of OpenAI, is currently under pressure to sell to Musk at his proposed price to avoid appearing to undercut OpenAI, but doing so could potentially undermine OpenAI's mission.
- If Musk's bid for a majority stake in OpenAI fails, it could still have an impact on the non-profit's plans to transition into a commercial entity, as it has raised questions about the true value of OpenAI and potentially attracted the attention of regulatory bodies.
