OpenAI CEO Sam Altman gave an unequivocal answer at a conference in Paris today when asked whether his company was for sale following a surprise $97.4 billion bid by an Elon Musk–led investor group.
With thousands of attendees listening in the audience, Altman smiled and said, tersely, “no,” adding that OpenAI is committed to pursuing its “unusual mission” of creating AGI, or artificial general intelligence.
But legal experts, as well as the tech investor community, know full well that none of the issues surrounding Musk’s bid for control of OpenAI are that simple. Musk’s bid, technically for OpenAI’s nonprofit assets, throws a big wrench in a major change Altman is trying to engineer to OpenAI’s convoluted structure.
Altman is trying to shift OpenAI into an entirely for-profit company, from control by a nonprofit entity. The move is intended to make it easier to secure capital for OpenAI to further develop its AI models, but the buyout bid adds a new layer of legal and financial uncertainty to the already complex scenario.
“If Sam Altman and the present OpenAI, Inc. Board of Directors are intent on becoming a fully for-profit corporation, it is vital that the charity be fairly compensated for what its leadership is taking away from it: control over the most transformative technology of our time,” said Marc Toberoff, the attorney representing Musk and his fellow investors, in a letter to the attorney generals of California (where OpenAI is based) and Delaware (where the OpenAI nonprofit is also registered).
But while Altman said OpenAI is not for sale, the fact is that OpenAI’s nonprofit arm cannot be sold. OpenAI Inc., which was founded in 2015 and controls the company’s for-profit business, OpenAI LP, can only be owned by another nonprofit, not by a person or a for-profit company, said Jill Horwitz, a professor at the UCLA School of Law.
That said, a nonprofit’s assets can, indeed, be sold, she explained. For example, many nonprofit hospital assets have been sold to for-profit hospital chains. But Altman has no authority to decide whether such a sale would take place or to whom. “It is up to the board of the nonprofit and, if the transaction is substantial like this one, with the involvement of the relevant state attorney generals and courts,” Horwitz said.
Even if OpenAI’s nonprofit assets were sold to Musk, however, he can’t simply take over and kick Altman to the curb. Michael Wyland, a nonprofit governance expert and partner at Sumption & Wyland, explained that any funds paid by Musk or anyone else would have to be put toward the mission of a nonprofit organization. Musk would also lack control of OpenAI’s nonprofit board, unless it was specifically spelled out in the sale document.
However, Musk may have several other motivations for making the bid. He has long feuded with Altman over OpenAI, which Musk cofounded. Musk left OpenAI in 2018 after trying unsuccessfully to gain primary ownership of the company. According to OpenAI, in 2017 Musk offered to merge OpenAI with Tesla. Then, in 2024, Musk sued OpenAI and Altman, alleging that OpenAI had abandoned its original nonprofit mission to develop AI for the benefit of humanity and instead prioritized profit through its partnership with Microsoft.
Rose Chan Loui, founding executive director of the Lowell Milken Center for Philanthropy and Nonprofits at UCLA Law, pointed out that simply making the $97.4 billion bid “sets a floor.” That is, it forces OpenAI to respond to the bid, complicating Altman’s plans to turn OpenAI from a for-profit entity controlled by a nonprofit into an entirely for-profit company.
“Even if they don’t want to compensate the nonprofit at that level, they have to explain why it’s not worth that or that they’re offering something better,” Loui said.
Further gumming up matters is Delaware law, the state where OpenAI’s nonprofit was founded, and the fact that OpenAI is attempting to buy the nonprofit’s assets itself. Once a company has said it’s considering a sale, it must at least consider unsolicited bids by outsiders, said Loui.
It’s not just the legal rules around OpenAI’s nonprofit that make Musk’s bid murky, at best. In terms of OpenAI getting new funding, Musk’s actions “complicate everything,” said Tomasz Tunguz, general partner at Theory Ventures. OpenAI is reportedly wrapping up a $40 billion investment from Japan-based investment firm SoftBank that would value it at around $300 billion. OpenAI is also navigating its relationship with its current biggest investor, Microsoft.
On the one hand, Musk’s bid feels a “little bit like a hostile takeover,” Tunguz said. On the other hand, even if the bid fails, there will be more scrutiny placed on OpenAI’s transaction to convert to a full for-profit institution. If Musk’s bid fails, “now all of a sudden OpenAI has to spend a lot more time on understanding all these legal questions, working with the attorney generals of these states, and it’s just friction.”
While Musk’s bid creates chaos, Tunguz said he doubts OpenAI’s funding efforts will be derailed, at least in the short term. He compared it to game theory, saying that the management team for OpenAI must figure out how to deal with Musk’s bid. They have to negotiate in a way that keeps prospective investors happy, so the plan to turn the company into a for-profit “can continue in a way that the attorneys general in California and Delaware can understand and publicly support.”
Steve Jang, founder and managing partner at investment firm Kindred Ventures, also alluded to the intricacies between Musk and Altman, calling it a “long chess game.” Not only is Musk an ex-cofounder with a grudge against OpenAI, but he also owns xAI, an upstart AI company that is an OpenAI competitor.
Against that backdrop, Jang says Musk is making a strategic move: “It says to shareholders of OpenAI, if you are ever willing to sell, I’m a buyer,” he noted.
In general, Musk likely had no expectation that the board would approve the bid, Jang added. “But it does create a necessary review and vote,” he said. “And it says to the market, this is what we imply the value of OpenAI to be.”
With additional reporting from Vivienne Walt in Paris.
