Elon Musk-Sam Altman Beef Escalates With OpenAI Takeover Bid

• A consortium of investors led by Elon Musk has offered to buy the nonprofit OpenAI Inc. for $97.4B.
• The move would grant Musk significant authority over OpenAI.
• CEO Sam Altman rejected the bid, which he called a tactic “to try and weaken us.”

Elon Musk’s out-of-the-blue offer to buy the nonprofit that controls OpenAI has escalated his longstanding beef with Sam Altman and complicated efforts to turn OpenAI into a for-profit corporation

But in a court filing on Wednesday, Feb. 12, a lawyer representing Musk said he would withdraw his $97.4 billion bid board of directors “preserve the charity’s mission” and halt its conversion to a for-profit corporation.

Musk-Led Consortium Bids $97.4B for Control of OpenAI

According to the Wall Street Journal, a consortium of investors led by Musk submitted its $97.4 billion offer to  OpenAI’s board of directors on Monday, Feb. 10.

The bid would grant Musk control of all of the nonprofit’s assets, including any stake in the for-profit entity.

The consortium brings together Musk’s xAI, Valor Equity Partners, Baron Capital, Atreides Management and other investors.

In a statement reported by the Journal, Musk said: “It’s time for OpenAI to return to the open-source, safety-focused force for good it once was. We will make sure that happens.”

OpenAI Structure Explained

Although the nonprofit (OpenAI Inc) doesn’t strictly own OpenAI’s for-profit entity (OpenAI LP), the organization’s governance structure is set up so that the nonprofit board has governance authority over OpenAI LP.

Things get complicated when considering a third entity—OpenAI LLC. A subsidiary of OpenAI LP, the limited liability company (LLC) is free to generate unlimited profit, unlike its parent company, whose profits are capped.

Musk and Altman’s feud centers on OpenAI’s transition away from its nonprofit roots. Musk’s offer to buy OpenAI Inc. is an attempt to gain control of OpenAI LP through the former’s governance authority, which includes the power to dismiss OpenAI’s CEO.

In a lawsuit filed last year, Musk argued that OpenAI LP violated its “founding agreement” by prioritizing profits and aligning with Microsoft. Meanwhile, he claimed that the OpenAI Inc. board, which is supposed to uphold OpenAI’s original mission, has failed in its duty.

Altman Rejects Bid—But Is It up to Him?

In a post on X, Altman rejected Musk’s offer, stating, “No thank you, but we will buy Twitter for $9.74 billion if you want.”

Meanwhile, the Journal reported that he sent a Slack message to employees reassuring them that “no individual can take control of OpenAI.”

“These are tactics to try and weaken us because we are making great progress.” the message concluded.

However, Altman doesn’t have the authority to reject Musk’s bid on his own. That decision rests with the nonprofit board of OpenAI Inc., which consists of Altman and ten independent directors.

Since November 2023, when Altman was fired and then reinstated by the OpenAI board, a major shakeup has seen the leaders of the insurrection against Altman replaced by allies.

The question now is whether they will remain loyal amid a complicated and divided legal and business environment.

Elon Musk to Abandon OpenAI Takeover if It Remains Non-Profit

According to the latest court filing, Musk’s “serious offer” to buy OpenAI I,c. was aimed at “the furtherance of its mission.”

However, if the 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,” it added.

Despite the publicity around the bid, on Thursday, Reuters reported that the OpenAI board has yet to receive a formal offer.

This has further fueled speculation that Musk doesn’t actually believe he will be able to buy OpenAI Inc. Instead, some observers have argued that the offer is more about putting a price tag on OpenAI Inc.

The result is to increase the expectation that the for-profit OpenAI LP will need to compensate the non-profit as part of the conversion, potentially stalling the entire process and placing an additional financial burden on the company.