OpenAI’s board and Musk’s lawyers disagree over takeover bid submission

Confusion continues to reign in the AI sector after OpenAI’s board revealed that it is yet to receive a formal bid from Elon Musk’s consortium, even though a lawyer for the billionaire said the offer was sent to the AI firm’s outside counsel.

The confusion came one day after Musk went public with his $97.4 billion offer to purchase the nonprofit that controls ChatGPT maker. However, both sides are still a loggerheads over what happened to the formal bid.

About the bid Musk’s consortium sent 

One source conversant with the subject told Reuters on Tuesday that OpenAI’s board of directors has not received a formal bid from Musk’s representatives, which added a layer of drama to the Tesla CEO’s unsolicited attempt to take control of the world’s most popular AI company.

According to Musk’s lawyer, Marc Toberoff, he sent the offer by email on Monday to OpenAI’s outside counsel at Wachtell, Lipton, Rosen & Katz. 

The bid was reportedly attached to an email and was in the form of a “detailed four-page Letter of Intent” to purchase OpenAI’s assets, signed by Musk and other investors and addressed to the board, according to Toberoff.

“Whether Sam Altman chose to provide or withhold this from OpenAI’s other Board members is outside of our control,” he said. 

OpenAI’s CEO’s responds to the buyout offer 

Sam Altman has said that the nonprofit that controls OpenAI is not up for sale. The offer comes amid Musk’s attempts to block the artificial intelligence startup from transitioning to a for-profit firm.

“I have nothing to say. I mean, it’s ridiculous,” Altman told Reuters when they asked him about it on the sidelines of an AI summit in Paris. He also dismissed Musk’s offer as a tactic to cause disruption within the organization. 

In an internal message to OpenAI employees on Monday, Altman stated that the board had yet to review the offer officially. However, it intends to reject it based on the interest of the company’s mission.

Musk, Altman, and other co-founders joined hands in 2015 to develop OpenAI as a nonprofit. However, Musk left before the company became a global AI success story due to a disagreement over the company’s direction and funding sources. By 2023, he had launched his own competing AI startup, xAI.

Musk, the CEO of Tesla and owner of technology company X, is a close ally of US President Donald Trump. He has a new role as the leader of the Department of Government Efficiency, a new arm of the White House tasked with shrinking the federal bureaucracy.

Meanwhile, OpenAI is in the process of raising $40 billion and is also seeking to transition into a for-profit from a nonprofit entity, a move it says is necessary to secure the capital needed for developing the best AI models. 

The complicated transition will require putting a price tag on OpenAI’s nonprofit control of the for-profit arm, which Musk believes is a betrayal of the company’s original ethos.

A legal review is happening 

Musk’s bid complicates OpenAI’s transition and raises questions about the fair market value of its assets, particularly regarding charitable assets in the complicated corporate conversion. All of this is reflected in the price anyone would have to pay for the nonprofit to give up control.

“It does help set a price point for the thinking about the valuation of the nonprofit assets,” Robert Weissman, co-president of Public Citizen, the consumer rights watchdog, has said. “If it were to occur as proposed, the regulators have a duty to ensure that if there’s a selloff of assets to a for-profit entity, that fair market value is obtained.”

In the meantime, Delaware Attorney General Kathy Jennings is reviewing OpenAI’s proposed changes. Like Musk, she plans to ensure the company sticks to its “specific charitable purposes for the benefit of the public beneficiaries, as opposed to the commercial or private interests of OpenAI’s directors or partners.”

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