Musk’s OpenAI Group has Bid $97.4 Billion for the Corporation.

(VOR News) – A consortium led by Elon Musk offered $97.4 billion on Monday to acquire the nonprofit OpenAI, preventing it from becoming a for-profit business.

Musk’s proposal will certainly intensify enduring conflicts with OpenAI CEO Sam Altman concerning the future of the ChatGPT developer at the forefront of a generative AI technology surge.

On Monday, Altman promptly wrote to X, stating, “No, thank you, but if desired, we can acquire Twitter for $9.74 billion.” In 2015, Musk and Altman established OpenAI as a nonprofit organization; however, Musk departed from the company before its significant development. He founded the competing AI firm XAI in 2023.

Musk serves as the CEO of Tesla and is a fervent supporter of President Donald Trump. Furthermore, he possesses ownership of social media and technology enterprise X.

He invested nearly $250 million to support Trump’s election and leads the Department of Federal Efficiency, a newly established White House agency tasked with significantly reducing federal bureaucracy.

Musk recently criticized Trump’s $500 billion OpenAI announcement.

OpenAI believes it must transition from a charity to a for-profit entity to secure the necessary money for developing superior AI models.

In August of the previous year, Musk initiated legal action against Altman and others, alleging that they violated contractual obligations by prioritizing profit over public welfare in their AI development efforts. In November, he requested a preliminary injunction from a US district judge to prevent OpenAI from becoming a for-profit entity.

Musk’s complaint against Altman and OpenAI alleges that the company’s founders initially persuaded him to finance a nonprofit organization intended to promote AI for the benefit of humanity; nevertheless, that organization has since redirected its focus towards profit.

“It is imperative for OpenAI to revert to its previous status as an open-source, safety-oriented entity,” Musk stated in a release on Monday. “We will ensure that it happens.”

On Monday, The Information reported that Altman communicated to staff that the board of directors intends to clarify that Musk’s “alleged bid” is not of interest to them.

Microsoft MSFT is supported by Musk and OpenAI.O delayed in responding to requests for commentary. Collaborating with Musk are Baron Capital Group, Emanuel Capital, and his AI company xAI.

The Wall Street Journal, which reported Musk’s proposal on Monday, asserts that xAI may collaborate with OpenAI. As reported by Reuters, xAI has recently secured $6 billion from investors, achieving a valuation of $40 billion.

“Introducing a complication.”

“This bid is certainly complicating matters,” stated Jonathan Macey, a professor of corporate governance at Yale Law School.

“The nonprofit is intended to utilize funds for charitable purposes, and if OpenAI opts to sell it to another party for a lesser amount, it raises concerns regarding the safeguarding of the beneficiaries’ interests.”

In its latest funding round, OpenAI attained a valuation of $157 billion, reinforcing its status as one of the most valuable private enterprises globally. SoftBank Group is in discussions to spearhead an investment round of up to $40 billion in OpenAI, which has an overall valuation of $300 billion, as reported by Reuters.

Aside from potential antitrust issues, Musk and his consortium would need to secure a substantial sum of capital for the transaction.

Musk possesses over $165 billion in Tesla stock, as per LSEG data, yet his bank debt is expected to be minimal following his $44 billion expenditure to acquire X, formerly known as Twitter, in 2022.

An unnamed investment banker suggests that Musk may divest a portion of his Tesla stock, secure loans against his assets, or leverage his substantial ownership in SpaceX as collateral.

D.A. Davidson analyst Gil Luria asserts that Musk’s proposal to acquire OpenAI’s charitable organization will complicate the company’s current fundraising initiatives and its transition to a for-profit model.

“The proposal seems to be backed by more reputable investors…” OpenAI may deem it excessive to disregard. SoftBank’s proposal may be scrutinized since the OpenAI board holds the fiduciary responsibility to assess whether this constitutes a superior offer.

SOURCE: DN

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