Elon Musk offers $97.4bn for OpenAI in an attempt to stop its transition into a fully for-profit company. A consortium led by billionaire Elon Musk has made a staggering $97.4 billion offer to acquire the nonprofit entity that controls OpenAI. According to a Reuters report, this move is seen as an attempt to prevent the company’s shift toward a for-profit model.
The consortium includes Musk’s AI startup xAI, Baron Capital Group, Emanuel Capital, and other investors. OpenAI’s structure could undergo a significant transformation if the deal goes through.
Elon Musk and OpenAI’s CEO, Sam Altman, have long been at odds over the company’s direction. OpenAI, initially founded as a nonprofit in 2015, later introduced a for-profit arm to attract investment and fund AI development.
In a statement on February 10, Musk emphasized the need for OpenAI to return to its original mission. “It’s time for OpenAI to return to the open-source, safety-focused force for good it once was. We will make sure that happens,” he said.
Altman swiftly rejected Musk’s bid. In a post on X (formerly Twitter), he responded, “No thank you, but we will buy Twitter for $9.74 billion if you want.” Musk reacted with a single word: “Swindler.”
Legal Battles and Regulatory Challenges
A consortium led by xAI and other investors supports the move as Elon Musk offers $97.4bn for OpenAI to regain control. Musk has been legally challenging OpenAI’s shift toward a for-profit model. In August 2024, he filed a lawsuit against Altman and OpenAI executives, claiming they had violated contractual obligations and prioritized profits over public interest. In November, he sought a preliminary injunction to block the transition.
Legal experts suggest Musk’s bid complicates OpenAI’s efforts to remove nonprofit oversight. Rose Chan Loui, executive director of the UCLA Law Center for Philanthropy and Nonprofits, stated that OpenAI’s leadership would have to justify rejecting a higher bid if they prefer a lower one.
Jonathan Macey, a corporate governance professor at Yale Law School, remarked that the nonprofit’s fiduciary responsibility could make it difficult to ignore Musk’s offer. “If OpenAI prefers to sell to another entity for less money, it raises concerns over the nonprofit’s obligations,” he noted.
Potential Impact on OpenAI’s Funding Plans
OpenAI was recently valued at $157 billion and is in talks with SoftBank for a new funding round that could raise $40 billion, increasing its valuation to $300 billion. Musk’s bid could disrupt these negotiations.
Investment analysts believe Musk’s consortium, backed by credible investors, could force OpenAI to reconsider its financial strategy. Gil Luria, an analyst at D.A. Davidson, noted, “This bid complicates OpenAI’s transition to a for-profit model. The offer seems legitimate, and OpenAI’s board must assess whether it presents a better financial option.”
Musk’s Financial Strategy for the Bid
OpenAI’s nonprofit board must now evaluate its legal duties as Elon Musk offers $97.4bn for OpenAI, setting a high benchmark for its valuation. Elon Musk’s ability to finance such a massive acquisition is under scrutiny. His Tesla stock is valued at approximately $165 billion, but his ability to leverage additional funds may be limited following his $44 billion purchase of Twitter in 2022.
To fund the bid, Musk may sell part of his Tesla stake, secure a loan against it, or use his shares in SpaceX as collateral. An investment banker, speaking anonymously, suggested that raising the required capital could be a complex process given Musk’s existing financial commitments.
The battle over OpenAI extends beyond financial concerns. Musk has been an outspoken critic of Altman’s leadership and OpenAI’s collaborations with government entities. Recently, former U.S. President Donald Trump endorsed a $100 billion AI infrastructure initiative involving OpenAI, SoftBank, and Oracle.
