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High-Stakes Legal Battle Looms Between Elon Musk and Sam Altman Over OpenAI’s Restructuring
A federal judge has scheduled a trial for March 16 in the legal dispute involving Elon Musk’s challenge to Sam Altman’s plans for reforming OpenAI’s business framework. This sets the stage for a significant confrontation between two of the tech industry’s leading figures.
During a hearing in Oakland, California, US District Judge Yvonne Gonzalez Rogers committed to expediting the proceedings, stating that she wanted to avoid a prolonged timeline that could extend into 2027. Last month, she had dismissed Musk’s proposal to temporarily halt OpenAI’s transition from a nonprofit model to a more conventional public benefit corporation.
Gonzalez Rogers indicated that the trial would address the primary allegation in Musk’s 2024 lawsuit, which claims that OpenAI’s restructuring is illegal. The timing of the trial could greatly influence OpenAI’s board decisions regarding its transition to a for-profit model. There is a possibility that the trial might commence after OpenAI has completed this transition, as the company is already negotiating restructuring plans with state officials in Delaware and California. The outcomes of these discussions are critical, particularly with regards to a significant funding round tied to the restructuring slated for completion by the end of 2025.
Elon Musk and Sam Altman were collaborators in founding OpenAI in 2015. However, Musk alleges that OpenAI strayed from its original mission of charity when it began to accept substantial financial contributions from Microsoft Corp. starting in 2019, a year after Musk departed from the organization’s board.
In response to this legal tussle, Musk launched his own AI enterprise, xAI, in 2023, and in March, xAI acquired the X social media platform under Musk’s ownership. This merger has reportedly valued the new entity, XAI Holdings, at over $100 billion (around ₹8,55,000 crore), according to Bloomberg News.
OpenAI, in defense of its position, has dismissed Musk’s legal claims, suggesting that his true motivation is to bolster xAI. The organization has requested that the court dismiss Musk’s lawsuit, citing it as a strategic move to undermine a rising competitor after Musk’s failed attempt to take control of OpenAI.
Recently, OpenAI announced the completion of a $40 billion (approximately ₹3,42,000 crore) funding round led by SoftBank Group Corp. This deal values OpenAI at $300 billion (around ₹25,65,000 crore), nearly twice its previous valuation of $157 billion (around ₹13,42,350 crore) achieved in October.
However, should OpenAI fail to finalize its restructuring by the end of 2025, SoftBank might choose to decrease its contribution to the funding round from $30 billion (roughly ₹2,56,500 crore) to $20 billion (approximately ₹1,71,000 crore), as reported by Bloomberg. OpenAI would then have the alternative of seeking out additional investors.
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