The consortium led by Musk includes his AI startup xAI, Baron Capital Group, Emanuel Capital and others.
XAI could merge with OpenAI following a deal, according to the Wall Street Journal, which first reported Musk’s offer earlier on Monday. xAI recently raised US$6 billion from investors at a valuation of US$40 billion, sources have told Reuters.
“THROWING A WRENCH”
“This (bid) is definitely throwing a wrench in things,” said Jonathan Macey, a Yale Law School professor specialising in corporate governance.
“The nonprofit is supposed to take money to do whatever good deeds, and if OpenAI prefers to sell it to somebody else for less money, it’s a concern for protecting the interests of the beneficiaries of the not-for-profit.”
OpenAI was valued at US$157 billion in its last funding round, cementing its status as one of the most valuable private companies in the world. SoftBank Group is in talks to lead a funding round of up to US$40 billion in OpenAI at a valuation of US$300 billion, including the new funds, Reuters reported in January.
Aside from any antitrust implications, a deal this size would need Musk and his consortium to raise enormous funds.
Musk’s stock in Tesla is valued at roughly US$165 billion, according to LSEG data, but his leverage with banks is likely to be thin after his US$44 billion buyout of X, which was then called Twitter, in 2022.
To finance such a bid, Musk could sell part of his stake in Tesla or take a loan against his stake, or use his stake in rocket company SpaceX that is worth tens of billions of dollars as collateral, according to an uninvolved investment banker, who requested anonymity.
“Musk’s offer to buy OpenAI’s nonprofit should significantly complicate OpenAI’s current fundraising and the process of converting into a for-profit corporation,” said Gil Luria, analyst at DA Davidson.
“The offer seems to be backed by more credible investors … OpenAI may not be able to ignore it. It will be the fiduciary responsibility of OpenAI’s board to decide whether this is a better offer, which could call into question the offer from SoftBank.”
