Musk's $97.4 Billion OpenAI Bid Puts Altman in Tough Spot

Elon Musk's $97.4 billion offer to acquire OpenAI's assets has created a significant challenge for Sam Altman, the company's CEO, as reported by The Wall Street Journal. While Musk's offer, backed by a consortium of investors, could be a major boon for OpenAI, the substantial valuation it implies also complicates the company's ongoing negotiations with existing and prospective investors.

Altman has been working with investors for months to determine fair compensation for the nonprofit that currently controls OpenAI as part of a plan to transition the ChatGPT developer into a for-profit entity. Musk's intervention could significantly alter the valuation of the nonprofit, impacting the equity distribution in the future for-profit OpenAI.

The higher the valuation of the nonprofit, the larger its stake will likely be in the for-profit OpenAI following the conversion. However, OpenAI is simultaneously negotiating equity stakes for Microsoft, its largest investor, along with other backers and employees. The company is also seeking to raise up to $40 billion in new capital, with investors in that round likely expecting equity in the for-profit OpenAI.

"Satisfying all those parties was already complicated," the WSJ notes. "If Musk’s gambit increases the equity awarded to the nonprofit, it will be even more difficult."

Altman has publicly rejected Musk's offer, stating that OpenAI's structure prevents any individual from gaining control. He accused Musk of using "tactics to try and weaken us" and of attempting to slow down OpenAI's progress. Bret Taylor, chairman of OpenAI's board, echoed these sentiments, calling Musk's offer a "distraction" and emphasizing the board's commitment to the company's mission.

Despite these public rebuffs, some experts believe the board may be unable to simply dismiss Musk's offer.

"If Elon’s is a fair price and the OpenAI nonprofit is empowered to make the decision, it could sell," said Harvey Dale, a professor of nonprofit law at New York University, to the WSJ.

The board's decision, however, is not solely about price. As a charity, OpenAI's primary obligation is to fulfill its legal purpose: advancing artificial intelligence for the benefit of humanity.

"The question of the appropriate price is secondary to the question of whether the board should sell the charitable assets at all," noted Jill Horwitz, a law professor at the University of California, Los Angeles, to the WSJ.

Musk's unsolicited offer intensifies a long-standing feud between him and Altman. The pair co-founded OpenAI in 2015, but Musk departed three years later. Following OpenAI's shift toward a more business-oriented focus after the successful launch of ChatGPT in 2022, Musk has criticized Altman for allegedly abandoning their original charitable mission. He has also launched a competing startup called xAI and filed several lawsuits against OpenAI.

Musk's latest move could draw a significant portion of the technology industry into the conflict. SoftBank is in talks to invest up to $25 billion into OpenAI, while Microsoft has already invested nearly $14 billion. A wide range of prominent Silicon Valley venture firms have investments in either OpenAI, xAI, or both. News Corp, the owner of The Wall Street Journal, also has a content-licensing partnership with OpenAI.