Musk Challenges OpenAI’s Corporate Restructure, Seeking Fair Market Valuation to Protect Public Interest
Billionaire Elon Musk’s attorney has asked the attorney generals of California and Delaware to push OpenAI to auction off a significant stake in its business in order to determine the fair value of its charitable assets during its corporate restructuring, sources told Reuters on Thursday.
Musk’s attorney, Marc Toberoff, sent a letter to the top law officers of both states on Tuesday, arguing they should provide a process for competitive bidding to establish the fair market value of OpenAI’s charitable assets to “protect the public’s beneficial interest,” as the company works to remove the control of its nonprofit, sources said.
An OpenAI spokesperson responded, “Elon is engaging in lawfare. We remain focused on our mission and work.” The company previously stated that the valuation of its charitable assets would be determined by independent financial advisors.
OpenAI co-founder Sam Altman, who became one of the tech world’s biggest names after the 2022 launch of ChatGPT, is working alongside Musk on the case. Backed by Microsoft, OpenAI was valued at $157 billion in October after raising $6.6 billion from investors.
Reuters first reported OpenAI’s plan to revamp its corporate structure so its for-profit business would operate independently from nonprofit control in September. The company detailed its plan in late December, stating that it would create a public benefit corporation to help “raise more capital than we’d imagined,” resulting in “one of the best resourced nonprofits in history.”
Musk, who owns AI startup xAI, is suing OpenAI in an attempt to block the company’s conversion, arguing it marks a departure from the mission he originally funded the company for. The court is expected to rule on the preliminary injunction that Musk’s lawyers applied for later this month.
Delaware Attorney General Kathy Jennings filed an amicus brief on December 29, stating she is currently reviewing OpenAI’s proposed changes.
Darryll Jones, Professor of Law at Florida A&M University, wrote in a blog, “That Delaware is on record asserting that it is closely monitoring the situation should definitely undercut a judge’s willingness to enjoin a transaction Musk and Encode characterize as dangerous, unwise, or the product of fiduciary violations.” Encode is an AI safety nonprofit that has joined Musk’s efforts to block OpenAI’s for-profit transition.
California Attorney General Rob Bonta has not commented on the case, despite a letter from Meta urging him to block it.
