Elon Musk Challenges OpenAI’s Corporate Restructuring in Court

Elon Musk, through his attorney Marc Toberoff, has formally requested the attorney generals of California and Delaware to intervene in OpenAI’s corporate restructuring plans. Musk’s team has urged the states to mandate a competitive bidding process to establish the fair market value of OpenAI’s charitable assets, sources familiar with the matter revealed.

Musk’s Legal Concerns

In a letter sent on Tuesday, Toberoff argued that a bidding process would protect the public’s interest in OpenAI’s non-profit assets as the company transitions its for-profit segment into a public benefit corporation. The restructuring, according to OpenAI, aims to facilitate the raising of substantial capital while maintaining its non-profit mission.

Musk has accused OpenAI of deviating from its founding mission, which he initially funded, and is seeking to block the restructuring through legal channels. Musk’s startup, xAI, and AI safety non-profit Encode have joined efforts to challenge OpenAI’s plans, claiming potential fiduciary violations and risks to public interest.

OpenAI Responds

OpenAI has remained steadfast in its position. A company spokesperson stated, “Elon is engaging in lawfare. We remain focused on our mission and work.” OpenAI emphasized that independent financial advisors would determine the valuation of its charitable assets.

The startup, co-founded by Musk and Sam Altman, gained global recognition following the 2022 release of ChatGPT. OpenAI, backed by Microsoft, was valued at $157 billion in October 2024 after raising $6.6 billion in investments.

Delaware AG Weighs In

Delaware Attorney General Kathy Jennings submitted an amicus brief on December 29, signaling that her office is closely monitoring the restructuring. Legal experts believe her involvement may influence the court’s decision on Musk’s application for a preliminary injunction.

Law professor Darryll Jones commented, “The Delaware AG’s scrutiny may undermine Musk’s argument that OpenAI’s restructuring is dangerous or misguided.”

OpenAI’s Restructuring Plans

OpenAI announced in late December that its restructuring would involve creating a public benefit corporation, separating its for-profit segment from its non-profit oversight. This move, according to OpenAI, would provide unprecedented resources for its non-profit arm, making it one of the best-funded non-profits globally.

The Road Ahead

The legal battle between Musk and OpenAI highlights broader concerns about governance, transparency, and the ethical stewardship of AI organizations. The court’s ruling on Musk’s preliminary injunction, expected later this month, will likely shape the trajectory of OpenAI’s restructuring and set a precedent for the governance of similar entities in the future.