Elon Musk's $97.4B unsolicited bid for OpenAI's nonprofit complicates for-profit conversion

Summary

Elon Musk Makes $97.4B Unsolicited Bid for OpenAI's Nonprofit, Complicating Sam Altman's Conversion Plans

Elon Musk's investor group has made a $97.4 billion unsolicited bid to acquire OpenAI's nonprofit entity, a move that upends Sam Altman's planned conversion of the company into a traditional for-profit structure and creates immediate complications for a separate $40 billion funding round led by SoftBank at a $300 billion valuation.

The bid is backed by Musk's xAI—which could merge with OpenAI following a deal—alongside investors Valor Equity Partners, Baron Capital, Atreides Management, Vy Capital, 8VC (led by Joe Lonsdale), and Ari Emanuel's Endeavor investment fund. Musk has filed legal complaints accusing OpenAI of betraying its original nonprofit mission by creating a for-profit arm and colluding with Microsoft to dominate AI development. His lawyer, Toby Tobaroff, sent letters to California and Delaware attorneys general requesting they open bidding on the company to determine fair market value of the nonprofit's charitable assets.

Musk's stated rationale frames the offer as a return to principle. "It's time for OpenAI to return to the open source safety focus it once was," he said. "We will make sure that happens." OpenAI has dismissed Musk's legal claims as baseless and overreaching, noting that the nonprofit will receive full value in its ownership stake of the for-profit. The company also released documents in December suggesting Musk previously supported a for-profit conversion but abandoned the idea because he couldn't secure control.

The structural complication is severe. OpenAI planned a conversion where the nonprofit would spin out and retain equity ownership of the new for-profit entity. The key shareholders in the resulting for-profit would be Microsoft, OpenAI employees, and the nonprofit itself, plus other venture investors. Musk's $97.4 billion bid for the nonprofit entity sets a high valuation bar—high enough that the nonprofit board may face pressure to justify rejecting it or accepting a lower valuation from Altman's conversion plan. If the nonprofit receives majority control of the for-profit as compensation, it would likely control the company outright. Tobaroff said Musk's group is prepared to match or exceed any higher bids.

The timing compounds the problem. OpenAI is mid-negotiation with Microsoft and other stakeholders over equity allocation in the new company. The nonprofit conversion was supposed to close by late 2026. Meta already sent a letter to California's attorney general in December opposing the plan. Now SoftBank, preparing to invest $15-25 billion in the separate funding round, faces uncertainty about who will actually own and control the company post-conversion.

Musk has escalated pressure on Altman across multiple fronts over recent weeks. Hours after the Trump administration announced the Stargate initiative—in which Altman appeared alongside the new president while Musk was notably absent—Musk claimed on X that the backers lacked promised capital and called Altman a "swindler." Altman disputed the claim. The bid arrives as Musk's xAI is spending $5 billion on a new training run, directly competing with OpenAI's model development.

The hosts note that few entities besides the world's richest person could hope to deploy $97.4 billion for this kind of acquisition, which effectively forces the nonprofit board into a corner: either justify turning down the offer or negotiate a deal that Musk structures. A nonprofit board has a duty to mission, not shareholder value, but the scale of the valuation and the clarity of competing leverage shifts the dynamics significantly.

Nonprofits don't face the same legal obligation to accept a superior offer that a for-profit board does, but Musk's offer—paired with his legal pressure and the public campaign—tests whether that structural protection holds when the alternative valuation is this high and the bidder this resourced.