How Elon Musk's €94.4 billion bid complicates matters for OpenAI

"We are not for sale,” Altman said on Tuesday at an artificial intelligence summit in Paris.

Musk’s bid, announced Monday, is the latest in a bitter years-long battle with Altman over control of the AI startup they both helped found a decade ago as a nonprofit and is now a leading force in the global boom surrounding generative AI technology.

“OpenAI has a mission,” Altman told France’s AI minister in an on-stage discussion Tuesday mobbed by tech industry workers and investors. “We are an unusual organisation and we have this mission of making AGI benefit all humanity. And we are here to do that.”

Its stated aim since its founding in 2015 is to safely build futuristic, better-than-human AI known as artificial general intelligence, or AGI. Musk, an early investor and board member, quit OpenAI in 2018 after an internal power struggle left Altman in charge.

Their public feud has escalated over the past year as Musk sued OpenAI and is working to grow his own AI company called xAI, part of a business empire that includes Tesla, SpaceX and social media platform X. Musk also now holds power as a top adviser to President Donald Trump in reshaping the US government, and has publicly questioned OpenAI’s Trump-backed private investment project for building AI data centers in the United States.

What happens next?

The offer complicates OpenAI's plan to shift its structure away from its nonprofit roots to a company beholden to shareholders.

OpenAI's nonprofit board will need to consider Musk's offer. It's not Altman alone who can accept or reject it, though the chair of the board, Bret Taylor, echoed Altman's approach and declared “OpenAI is not for sale” at a Wall Street Journal event on Tuesday in Palo Alto, California.

Taylor said Musk's move was “largely a distraction” from the board's fiduciary duty to its mission.

As a nonprofit board, said Taylor, “our job is very simple, which is to basically evaluate every strategic decision of the organisation through that one test, which is, ‘Does this actually further the mission of ensuring AGI benefits humanity?’ And I have a hard time seeing how this would.”

The board will need to weigh not just the value of the company's assets but also the value of controlling the company developing this technology. Musk's offer also seems to set a floor for how much the nonprofit should be paid if it does relinquish control of its subsidiaries.

Rose Chan Loui, executive director for the Lowell Milken Center on Philanthropy and Nonprofits at UCLA Law, said the board should consider the credibility of Musk's offer, including if he and his investors will pay in cash. And they should consider whether a new board under the control of Musk and other investors would be independent and what guarantees they can give about protecting its public mission.

Musk's $44 billion Twitter takeover in 2022 also started with an unsolicited offer and a legal fight with Twitter's board, which was also led by Taylor, a former Facebook and Salesforce executive. However, taking over OpenAI would be more complicated because of its charitable purpose.

“There is a legally binding purpose,” said Jill Horwitz, a professor at UCLA School of Law. “It is the promise that was made to the public when OpenAI, the nonprofit, was formed. That promise is legally enforceable.”

The sudden popularity of ChatGPT two years ago brought worldwide fame and new commercial possibilities to OpenAI and also heightened internal turmoil over the future of the organization and the advanced AI it was trying to develop. Its nonprofit board fired Altman in late 2023. He came back days later with a new board.

OpenAI's nonprofit complications

OpenAI’s nonprofit purpose, as defined most recently in 2020, is “(to) ensure that artificial general intelligence benefits all of humanity, including by conducting and/or funding artificial intelligence research.”

The question is, can it do that if it sells its assets and loses control of the company developing this technology?

“To make the promise to the world that you are bound by a legal purpose and to build with that promise, including telling your investors not to expect any returns and to think of your investments as more akin to a donation than an investment," said Horwitz. "And then to say once you’ve gotten big enough, ’You know what? We’d like to own this.' That seems like a real violation of the promise.”

Musk sued OpenAI last year, first in a California state court and later in federal court, alleging it had betrayed its founding aims as a nonprofit research lab that would benefit the public good. A lawyer for Musk has said he invested about $45 million in the startup from its founding until 2018.

Lawyers for OpenAI and Musk faced off in a California federal court last week as a judge weighed Musk’s request for a court order that would block OpenAI's for-profit conversion.

The judge hasn’t yet ruled on Musk’s request but in the courtroom said it was a “stretch” for Musk to claim he will be irreparably harmed if she doesn’t intervene to stop OpenAI from moving forward with its planned transition. But she also suggested Musk had plausible enough arguments to take to a jury trial.

Who else is backing Musk's OpenAI bid?

Along with Musk and xAI, others backing the bid announced Monday include Baron Capital Group, Valor Management, Atreides Management, Vy Fund, and firms run by Musk allies Ari Emanuel and Jon Lonsdale.

Musk attorney Marc Toberoff said in a statement that if Altman and OpenAI’s current board “are intent on becoming a fully for-profit corporation, it is vital that the charity be fairly compensated for what its leadership is taking away from it: control over the most transformative technology of our time.”

Altman told employees this week that OpenAI's structure “ensures that no individual can take control of OpenAI” and he has sought to characterize Musk's tactics as those of a competitor trying to catch up.

“I think he’s probably just trying to slow us down. He obviously is a competitor,” Altman told Bloomberg TV at the Paris summit on Tuesday.

Continuing their deeply personal feud, Altman said Musk is probably not a “happy person.”

“Probably his whole life is from a position of insecurity. I feel for the guy,” Altman said.