Elon Musk-led group of investors makes nearly $100 billion bid for OpenAI

Altman and Musk
(Image credit: TechCrunch / Heisenberg Media)

Elon Musk and a group of investors have offered $97.4 billion to acquire OpenAI's nonprofit arm that controls the company, reports the Wall Street Journal. Sam Altman, chief executive and a co-founder of Open AI, and the board of directors, have rejected the bid, stating the company's governance prevents outside control. Musk argues the nonprofit should remain committed to open-source safety-focused AI, while OpenAI is moving toward a for-profit model.

"It is time for OpenAI to return to the open-source, safety-focused force for good it once was," a statement by Elon Musk published by his lawyer Marc Toberoff reads. "We will make sure that happens."

The acquisition proposal is supported by Musk's AI company, xAI, and multiple investment companies, including Atreides Management, Baron Capital, 8VC, Valor Equity Partners, Vy Capital, and 8VC. In addition, the proposal is backed by Hollywood executive Ari Emanuel, CEO of Endeavor, and Joe Lonsdale, a co-founder of Palantir.

Musk's attorney, Marc Toberoff, submitted the offer to OpenAI's board, aiming to buy all nonprofit assets. This proposal challenges Sam Altman's plans to transition OpenAI into a traditional for-profit company while ensuring the nonprofit retains equity. OpenAI is raising billions to fund its AI infrastructure and a for-profit entity could raise more money and therefore speed up the progress of AI development in general and artificial general intelligence (AGI) in particular.

OpenAI is currently seeking to secure up to $40 billion in new funding in an investment round led by SoftBank, which is negotiating to contribute between $15 billion and $25 billion. If the company succeeds, this could increase OpenAI's valuation to $300 billion. The funding round follows a $6.6 billion funding round in October that valued OpenAI at $157 billion.

That said, OpenAI has confirmed it has no intention of accepting Musk's bid. In a message to employees, Altman emphasized that OpenAI's structure prevents any single person from taking control. He called Musk's offer a way to destabilize the rapidly developing company.

Musk, who co-founded OpenAI with Altman in 2015, left the company in 2019. Since then, OpenAI has raised substantial funding from Microsoft and other investors. Musk has taken legal action against OpenAI, claiming it abandoned its original mission by working closely with Microsoft. He has also questioned how OpenAI values its nonprofit entity as it transitions to for-profit status. In January, his lawyer contacted attorneys general in California and Delaware, urging them to oversee the valuation process to ensure fairness.

OpenAI insists Musk's legal claims are unfounded and that the nonprofit will be fairly compensated in the restructuring. The company also released documents showing Musk had previously supported a for-profit transition but withdrew when he could not gain control.

A part of OpenAI's vision is Stargate, an initiative to invest $500 billion in AI infrastructure in the U.S. over the next four years. Musk has publicly criticized Stargate, arguing that its supporters lack the necessary funding: shortly after the announcement, he called Altman a 'swindler' and claimed the project was overpromising. Altman denied Musk's allegations, but the dispute has added to the uncertainty surrounding OpenAI's transition.

TOPICS
Anton Shilov
Contributing Writer

Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

  • George³
    Admin said:
    Elon Musk and a group of investors offered $97.4 billion to acquire OpenAI's nonprofit arm that controls the company but the offer was quickly rejected.
    Must be mistaken. If I make offer right deal is $9.7B. OpenAI has too much competition, include with more efficiency models. But my information is little older.
    Reply
  • ekio
    Musk does this move because it makes the shady Sam Altman take over illegal.

    Sam A is selling the company to himself for nothing, to change its non profit goal to for profit. By bidding higher, Musk exposes him and make this non applicable legally.

    Musk is preventing Scam A from stealing the AI away from its initial plan.
    Reply
  • why_wolf
    ekio said:
    Musk does this move because it makes the shady Sam Altman take over illegal.

    Sam A is selling the company to himself for nothing, to change its non profit goal to for profit. By bidding higher, Musk exposes him and make this non applicable legally.

    Musk is preventing Scam A from stealing the AI away from its initial plan.
    If that were true all he'd have to do is offer to buy it for $1 not for 97billion + roping in outside investors.
    Reply
  • JamesJones44
    ekio said:
    Musk does this move because it makes the shady Sam Altman take over illegal.
    Please explain how it makes a take over "illegal". I would love to see a reference to a law that says a bid for shares in a company suddenly makes a corporate entity or individual guilty of a crime or legally blocks actions by a corporate entity or individual.
    Reply
  • acadia11
    Remember 1984 and that corporations are people. They are in fact people, or a person, and that person wrote …”One AI to rule them all, One AI to find them, One Ai to bring them all, and in the darkness bind them”

    I literally can feel the evil in that room through the internet. Now …. That’s sumthin’ else.
    Reply
  • acadia11
    ekio said:
    Musk does this move because it makes the shady Sam Altman take over illegal.

    Sam A is selling the company to himself for nothing, to change its non profit goal to for profit. By bidding higher, Musk exposes him and make this non applicable legally.

    Musk is preventing Scam A from stealing the AI away from its initial plan.
    musk is preventing a scam that he’s not orchestrating don’t confuse this with altruism. There is no one in that room, most especially Elon Musk, that is on your side I’ll guarantee your life on it.
    Reply
  • TheOtherOne
    why_wolf said:
    If that were true all he'd have to do is offer to buy it for $1 not for 97billion + roping in outside investors.
    Wouldn't Sam gonna HAVE to now outbid this offer if he sells the company to "himself"?

    I am no expert in companies sales business but my understanding is, Sam was gonna sell the company to himself at a very low low price but now if he wants to do the same, he will have shell out more than 97 billion dollars or can he still pay $9 and buy the company?
    Reply
  • JamesJones44
    TheOtherOne said:
    Wouldn't Sam gonna HAVE to now outbid this offer if he sells the company to "himself"?
    It's 100% up to the board and existing shareholders to accept or reject the offer. OpenAI is not a public company, interested parties can't just buy shares off the public market to do a traditional hostile takeover of simply buying up shares on the public market. He would need to convince the existing shareholders to sell their shares to him directly and private shares often need approval before they can be sold. No different than you starting an Etsy business out of your garage, no one can come in offer you 100k and require you to match. It requires you approving the sale of your business to the investor/acquirer or rejecting it, nothing else.

    TheOtherOne said:
    I am no expert in companies sales business but my understanding is, Sam was gonna sell the company to himself at a very low low price but now if he wants to do the same, he will have shell out more than 97 billion dollars or can he still pay $9 and buy the company?
    If that were the case companies would create outrages bids all the time to block mergers of competitors, fortunately it doesn't work that way. The only reason this is even viable is because of the way the company was structured for OpenAI. In the current OpenAI structure, the non-profit entity owns the for profit business. According to their bylaws for OpenAI to switch to non-profit it must first "composite" the nonprofit division for the money making division. This price is to be set by discussions with shareholders and that is where things get complicated.

    Internally Sam and other members of the board have likely set a value of the for profit division based on the money raised from outside investors, this is very similar to how non-publicly traded startup get value (It can't be $9 because no investor is going to accept pennies a share for a company valued at 157 billion, especially Microsoft who put 10 billion in for a 49% stake). What Musk is hoping to do is cause a "revaluation" of the company by existing shareholders, for which then could question whether that value of the for profit division is higher than what it is currently. If the board went against those who wanted to take Musk bid, the shareholders could sue for the difference in price. For example say the for profit company was valued at 157 billion for 100% of the company. Musks offer put a theoretical value of 97 billion for 51% which would value the company $190 billion for 100% of the company, a difference of 33 billion. Shareholders could sue for their cut of the 33 billion dollar difference. This can severely complicate the compensation plan to the non-profit if shareholders sue for the difference.

    However, for Musk's bid to be legitimate, he will eventually be asked to prove he has to funds. If he doesn't then the bid just delays the change over. If he does, then the scenario above comes into play. Given Musk had issues securing 44 billion for Twitter and the fact that he tried to walk away from that deal, could give the board legitimate reasons for rejecting his big outright that would likely protect them from lawsuits.

    The times has a write up of largely what is above (requires a login, but not subscription)

    https://www.nytimes.com/2025/02/11/business/dealbook/elon-musk-hostile-bid-openai.html
    Reply