On Monday, Elon Musk, the world’s richest man, offered to buy the nonprofit that effectively governs OpenAI for $97.4 billion. The unsolicited buyout would be financed by Musk’s AI company, xAI, and a consortium of outside investors, per a letter sent to California and Delaware’s attorneys general.

OpenAI CEO Sam Altman quickly dismissed Musk’s bid, and took it as a chance to publicly dunk on him.

“No thank you, but we will buy Twitter for $9.74 billion if you want,” Altman wrote in a post on X just hours after reports emerged of Musk’s offer for OpenAI. Musk owns X, the social network formerly known as Twitter; he paid roughly $44 billion for it in October 2022. 

The two have a history. Musk is an OpenAI co-founder, and both he and xAI are currently involved in a lawsuit that alleges that OpenAI engaged in anticompetitive behavior, among other things.

But Altman’s rejection a $97.4 billion takeover offer is more complicated than just saying “no thanks,” according to corporate governance experts who spoke with TechCrunch.

For background, OpenAI was founded as a nonprofit before transitioning to a “capped-profit” structure in 2019. The nonprofit is the sole controlling shareholder of the capped-profit OpenAI corporation, which retains formal fiduciary responsibility to the nonprofit’s charter. 

OpenAI is now in the process of restructuring – this time to a traditional for-profit company, specifically a public benefit corporation – in a bid to raise much more capital. But Musk – who is notorious for drowning his enemies in legal troubles – may have stalled the transition and raised the price of OpenAI’s nonprofit with his bid.

Delaware and California‘s attorneys general have requested more information from the ChatGPT maker about its plans to convert to a for-profit benefit corporation. The situation also forces it to consider outside bids seriously.

OpenAI’s board will almost certainly refuse the bid, but Musk has been setting the stage for future legal and regulatory battles. He’s already attempting to stall OpenAI’s for-profit conversion via an injunction, for instance. The bid appears to be an alternative offer, of sorts. 

Now, OpenAI’s board will have to demonstrate that it’s not underselling OpenAI’s nonprofit by handing the nonprofit’s assets, including IP from OpenAI’s proprietary research, to an insider (e.g. Sam Altman) for a steep discount.

“Musk is throwing a spanner into the works,” said Stephen Diamond, a lawyer who represented Musk’s opponents in corporate governance battles at Tesla, in an interview with TechCrunch. “He’s exploiting the fiduciary obligation of the nonprofit board to not undersell the asset. [Musk’s bid] is something OpenAI has to pay attention to.”

OpenAI is said to be gearing up for a funding round that would value its for-profit arm at $260 billion. The Information reports that OpenAI’s nonprofit is slated to get a 25% stake in OpenAI’s for-profit.

With his bid, Musk has signaled there’s at least one group of investors willing to pay a sizable premium for OpenAI’s nonprofit wing. That puts the board of directors in a tight spot. 

Still, just because Musk threw out an eye-popping offer doesn’t mean that OpenAI’s nonprofit has to accept.

Corporate law gives tremendous authority to incumbent boards to protect against unsolicited takeover bids, according to David Yosifon, a Santa Clara University professor of corporate governance law.

OpenAI could make the case that Musk’s bid is a hostile takeover attempt given that Musk and Altman aren’t the best of friends.

The company could also argue that Musk’s offer isn’t credible because OpenAI is already in the midst of a corporate restructuring process.

Another approach OpenAI could take would be challenging Musk on whether he has the funds. As The New York Times notes, Musk’s wealth is largely tied to his Tesla stock, meaning that Musk’s investment partners would have to supply much of the $97.4 billion total.

OpenAI’s board may need to review Musk’s offer to fully asses whether it aligns with the nonprofit’s mission, not just specific financial or strategic goals, according to Scott Curran, the former General Counsel to the Clinton Foundation. That means Musk’s offer could be weighed against OpenAI’s mission: “to ensure that artificial general intelligence – AI systems that are generally smarter than humans – benefits all of humanity.”

“When Altman posted that response [on X], that was probably done without legal guidance,” Yosifon said. “It’s not good for a regulator to see that kind of dismissive, knee-jerk tweet.”

The board is likely to side with Altman. Nearly all the directors joined after Altman was briefly fired, then rehired, by the nonprofit’s board in late 2023. Altman himself is also a board member.

If nothing else, Musk’s bid may raise the potential market value of the OpenAI nonprofit’s assets. That could force OpenAI to raise more capital than it originally anticipated, and complicate talks with the startup’s existing backers. It could also dilute the value of stakes held by OpenAI investors in the for-profit arm, including major partners such as Microsoft. 

That’s sure to anger Altman, who’s been working with investors for months to determine how to fairly compensate the nonprofit.

The gist is: OpenAI’s corporate restructuring plans just got more complex.