Elon Musk Shoves Another Chaos Wrench in OpenAI's Gears
Jessica Toonkel & Berber Jin
Clearly not busy enough, Elon Musk is now trying to take on a new challenge: buying a non-profit. Specifically, a certain one that he knows all too well:
A consortium of investors led by Elon Musk is offering $97.4 billion to buy the nonprofit that controls OpenAI, upping the stakes in his battle with Sam Altman over the company behind ChatGPT.
Musk’s attorney, Marc Toberoff, said he submitted the bid to OpenAI’s board of directors Monday.
I would call this latest twist shocking except that a) nothing involving Musk is shocking anymore b) I more or less predicted it. Exactly one month ago, in noting that on top of suing OpenAI and filing an injunction to stop a transition to a for-profit entity, Musk was now trying to get the courts in California (where OpenAI is based) and Delaware (where OpenAI is incorporated) to open up an auction to properly value the non-profit ahead of allowing OpenAI to become a for-profit entity. As I specifically highlighted in my blurb:
Also fun: this would presumably allow Musk himself to bid on the stake!
And here we are. While as far as I know, neither state has yet weighed in on the concept of an auction for the asset, Musk essentially seems to be forcing their hand here. And while I'm not a lawyer, allow me to play one on the internet just for the purposes of gaming this out a bit.
Because OpenAI famously has no actual equity shareholders right now, the board is the only entity that controls the company. The members that fired Sam Altman in 2023 have mostly been replaced (except for Adam D'Angelo) and the board has been greatly expanded to 10 people now, chaired by Bret Taylor – and yes, now featuring Altman in a seat. He obviously doesn't want to sell anything to Musk, but because of the transition discussions, the board is likely in a trickier spot than if they were just content to be a non-profit. In that case, they could just say something like "no, we're a non-profit, we're not for sale". But now, because the non-profit is going to need to be compensated for the future for-profit taking much of the value created during the time as a non-profit it's... complicated. Again, presumably! (And ChatGPT itself agrees with me.)
So if Elon Musk and his backers are offering (an oddly specific) $97.4B, the board will presumably have to weigh if that's a fair value for the entity and if it's a better deal to take than a piece of the future for-profit. In that same blurb, I also wrote:
I've tried to guesstimate how I thought the equity might be carved up in the past. Total guess, but if the non-profit gets 25% of the equity, that would be worth nearly $40B at OpenAI's current $157B valuation. Presuming that valuation goes up over the next year, we're probably looking at a "fair" price over $50B (again, in my estimate). Also note the concern from the Musk team about Delaware overseeing this process, since that's also the state which has blocked his Tesla pay package.
And given the reports of a new $40B round that would value OpenAI at $300B, my guesstimated price goes to $75B. Musk's offer would be a $22.5B premium on top of that (made up number).
If nothing else, it's seemingly attempting to set a floor for the value of the non-profit. That means OpenAI itself will have to be valued even higher to hit the mark (again, in my total guess) or the other would-be shareholders would have to be diluted further. If Musk is valuing the non-profit at $97.4B at the new $300B price, he's suggesting the entity should hold 32.5% of the equity. (If he's using last round's price, he's suggesting the non-profit should own 62%!)
Anyway, maybe OpenAI's board is able to tell Musk to pound sand here, but I don't think it will be as straightforward as just tweeting it. If nothing else, it's a very Muskian attempt to further delay and cause chaos in the transition process. Someone really didn't like that 'Stargate' announcement, I guess. (Wonder why.)
One more thing: Beyond the money, Musk is clearly making the open/safety case for his intentions in such a transaction. There's a whiff of the Twitter takeover here, of course, but again, it's potentially more important legally here because of the transition.
“It’s time for OpenAI to return to the open-source, safety-focused force for good it once was,” Musk said in a statement provided by Toberoff. “We will make sure that happens.”
And it may rally others to support his case. Making an open OpenAI is all the rage right now – including, perhaps, within OpenAI itself... And we haven't even talked about the political element of all this.
A lot of conflicts. Even more interest. And just when you thought a feud couldn’t possibly get any bigger than Kendrick Lamar performing “Not Like Us” at the Super Bowl…