Musk’s $97.4B Bid Threatens to Stall OpenAI’s For-Profit Transition
On Monday, Elon Musk, the world’s richest man, made an audacious offer to acquire the nonprofit governing OpenAI for $97.4 billion. The unsolicited proposal would be financed by Musk’s AI venture, xAI, alongside a consortium of investors, according to letters sent to the attorneys general of California and Delaware.
Sam Altman, OpenAI’s CEO, wasted no time rejecting the offer, delivering a sharp response on X (formerly Twitter):
“no thank you, but we will buy Twitter for $9.74 billion if you want.”
Musk, who owns X, had acquired the platform for $44 billion in October 2022. His contentious history with OpenAI — as a co-founder turned rival — adds fuel to an already volatile relationship. Musk and xAI are currently embroiled in a lawsuit accusing OpenAI of anticompetitive practices.
But Altman’s rejection of the $97.4 billion bid isn’t as simple as it seems, according to corporate governance experts.
Musk’s Bid and Its Potential Implications
OpenAI, originally founded as a nonprofit, transitioned to a “capped-profit” structure in 2019, with the nonprofit maintaining control over its for-profit subsidiary. Now, the company is pursuing another transformation: becoming a public benefit corporation (PBC) to attract higher capital.
However, Musk’s bid could complicate OpenAI’s transition. Delaware and California attorneys general have requested additional information about the nonprofit’s conversion into a PBC. While OpenAI’s board is expected to decline Musk’s offer, it must now thoroughly evaluate the proposal to demonstrate due diligence, potentially delaying its plans.
Moreover, Musk has already sought an injunction to stall OpenAI’s restructuring process, positioning his bid as both an alternative and a legal countermeasure.
Strategic Rejection
While Musk’s offer is massive, OpenAI has strong grounds to reject it. Corporate law empowers boards to protect against hostile takeover attempts — a term that could describe Musk’s proposal given his contentious relationship with Altman.
OpenAI’s board, largely aligned with Altman, can also argue that Musk’s bid lacks credibility as the company is already in the middle of its restructuring plans.
Impact on OpenAI’s Valuation
Musk’s maneuver may inadvertently increase the nonprofit’s perceived market value. If OpenAI’s assets are deemed undervalued, the board may need to raise additional capital, complicating discussions with current investors and potentially diluting existing stakes, including those held by major partners like Microsoft.
Altman, who has spent months negotiating fair compensation for OpenAI’s nonprofit, faces additional hurdles as Musk’s bold offer raises new questions about the organization’s valuation and governance.
In the end, Musk’s $97.4 billion bid might not succeed, but it’s already creating ripples that could reshape OpenAI’s trajectory.