OpenAI rejects Musk’s takeover offer, says it was ‘not a bid at all’

OpenAI has officially rejected Elon Musk’s proposal to buy the artificial intelligence startup’s nonprofit parent for $97.4 billion.

In a short letter to Musk’s lawyer Friday, OpenAI’s attorney, William Savitt, said the OpenAI board had reviewed the proposal and determined that the billionaire’s “much-publicized ‘bid’ is in fact not a bid at all.”

The “proposal, even as first presented, is not in the best interest of OAI’s mission and is rejected,” Savitt wrote to Marc Toberoff, who represents Musk. “The decision of the OAI board on this matter is unanimous.”

OpenAI Chairman Bret Taylor said in a statement that the company “is not for sale.”

“Any potential reorganization of OpenAI will strengthen our nonprofit and its mission to ensure AGI benefits all of humanity,” he wrote, referring to artificial general intelligence.

On Monday, Toberoff disclosed that Musk was leading a group of investors in offering to buy control of OpenAI for $97.4 billion. The offer, which Toberoff said he submitted Monday, was for the nonprofit that oversees the developer of ChatGPT.

“It’s time for OpenAI to return to the open-source, safety-focused force for good it once was,” Toberoff wrote at the time.

In a response on X, OpenAI CEO Sam Altman wrote, “no thank you but we will buy twitter for $9.74 billion if you want.” Musk is the owner of X, formerly Twitter.

Musk then replied to Altman on X, with “swindler,” and in a reply to a different user, called him “Scam Altman.“

The Musk-Altman drama dates back to 2015, when they were two of the founders of OpenAI, launching it as a nonprofit AI research lab. The longtime friends and colleagues have become bitter adversaries since OpenAI’s emergence as the pioneer of generative AI through its viral ChatGPT chatbot.

OpenAI has been trying to convert into a for-profit entity to take advantage of the huge commercial demand for its technology. Microsoft has poured billions of dollars into the company, and SoftBank is close to finalizing a $40 billion investment in OpenAI at a $260 billion valuation, CNBC’s David Faber reported Feb. 7.

Musk is suing OpenAI alleging breach of contract and attempting to thwart its transition to a for-profit structure. He’s also raised billions of dollars for his AI startup rival xAI.

With OpenAI still overseen by a nonprofit parent, its effort to flatly reject Musk’s takeover bid may be complicated. That’s because the board doesn’t have a fiduciary responsibility to investors, but is rather officially beholden to OpenAI’s charter.

Toberoff sent a letter to the attorneys general in California and Delaware on Jan. 7, asking that bidding be opened up for OpenAI. Musk said in a court filing that he will withdraw his bid for OpenAI’s nonprofit arm if the ChatGPT maker stops its conversion into a for-profit entity.

Joel Fleming, a securities litigator at Equity Litigation Group, said boards are usually not at legal risk for rejecting a takeover offer.

“Even in a for-profit corporation, directors typically don’t face legal exposure for a ‘just say no’ response,” Fleming said in an email. “In a non-profit corporation, the goal isn’t to maximize shareholder value so there’s even less reason to think that directors would face any legal risk simply for saying no.”

— CNBC’s Lora Kolodny contributed to this report.

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