We have spent much of the past 24 hours on the telephone trying to get to the bottom of Elon Musk’s hostile bid for Sam Altman’s OpenAI. It was a development in their corporate battle (or soap opera) that few could have seen coming. Altman, who is in Paris at an A.I. summit, hadn’t even seen the offer before rejecting it out of hand.
But what does it mean to make a hostile bid for a nonprofit? How do board members actually balance any fiduciary duties they owe to investors in a for-profit subsidiary versus their institution’s mission? The man in the middle of all of these questions is Bret Taylor, the board’s chair. Taylor has more experience dealing with a hostile bid by Musk than most: he was the chair of Twitter’s board when Musk bought it. We break it all down below.
Musk’s $97 billion spoiler effort
The latest twist in the OpenAI saga involves, of course, Elon Musk. A consortium led by the entrepreneur put a $97.4 billion offer on the table to essentially buy control of OpenAI.
It’s just the latest battle in the escalating fight between Musk and Sam Altman, two of Silicon Valley’s biggest figures. A sign of how things are going: Altman rejected the offer on X, writing, “no thank you but we will buy twitter for $9.74 billion if you want.” Musk replied, “Swindler.”
The blockbuster bid complicates things for OpenAI. The start-up is about to close a $40 billion fund-raising deal with SoftBank at a valuation of $300 billion. Altman also is trying to pull off a much-needed plan to convert the nonprofit OpenAI into a for-profit entity.
A question of the OpenAI board’s duties: Its directors don’t have any fiduciary responsibility to maximize returns, since it’s a charity. Board members include Bret Taylor, who sparred with Musk over his purchase of Twitter, and Larry Summers, the former Treasury secretary, whom Musk criticized just on Monday.
But that’s not the real problem. Musk appears to be trying to force Altman into potentially paying more to transform OpenAI into a for-profit company. Billions are on the line.
A recap: Musk and Altman co-founded OpenAI in 2015 as a charitable A.I. lab, but they’ve been openly feuding for years. Musk filed a series of legal complaints and has accused Altman of straying from the nonprofit’s mission.
Even though OpenAI began as a nonprofit, it created a for-profit subsidiary to allow it to raise money. The start-up’s investors pushed to restructure the organization into a for-profit entity so that it would have fewer control complications. Altman has two years to make this change, or OpenAI will have to return the money it has raised.
Here’s how the conversion would work. Altman has to compensate OpenAI’s nonprofit division, which controls the money-making division. He could pay a one-time fee or give it a minority stake in the new for-profit business.
But Musk’s bid makes this more difficult. Whatever internal discussions Altman has had about the value of OpenAI’s nonprofit entity, Musk just set a floor price — in public. It also puts added pressure on any regulatory review. To gain approval, any deal Altman works out will have to be seen as equal to or better than Musk’s offer.
“If this is a legitimate bid — and they think it’s reasonably likely that he can come up with the money — that starts to look like the fair price of the assets,” Samuel Brunson, associate dean for academic affairs at Loyola University Chicago School of Law, told DealBook’s Lauren Hirsch.
But OpenAI has some defenses. It can question the legitimacy of Musk’s bid. (Remember that Musk tried to walk away from his offer to buy Twitter.)
OpenAI could also challenge Musk on whether he has the funds. Musk’s wealth is largely tied to his Tesla stock, which means he may not have billions of his own cash to easily tap. Musk’s bid is partially being backed by his own A.I. venture, xAI, which was last valued at as much as $40 billion.
Altman threw another jab this morning. Asked on Bloomberg Television this morning if Musk’s move was driven by insecurity about xAI’s standing, the OpenAI chief said, “Probably his whole life is from a position of insecurity.”
Altman added, “I don’t think he’s a happy guy. I feel for him.”
HERE’S WHAT’S HAPPENING
The Justice Department wants to drop charges against Eric Adams. Manhattan prosecutors were ordered by bosses in Washington to cease their case against New York City’s mayor, who was indicted in September as part of a sweeping federal criminal corruption case. The move raises questions about the independence of federal prosecutors in the Trump era. It’s unclear whether Danielle Sassoon, the acting head of the U.S. attorney’s office in Manhattan, will obey the order.
President Trump pressures Jordan and Egypt to take Gaza residents. He said he would cut aid to the Middle East countries if they refused his demand to take in most Palestinians from the territory, suggesting he’s serious about his highly contentious — and potentially illegal — plan to clear out Gaza to redevelop the area. Separately, Trump signed an executive order that stops enforcement of a decades-old ban on companies bribing foreign officials to win business.
Meta begins cutting thousands more positions. The tech giant has started notifying employees that they will be laid off, according to Business Insider, making good on Mark Zuckerberg’s warning that low-performing staff members would lose their jobs. Meta has committed to spending up to $65 billion this year to keep up in the artificial intelligence race, raising a need to offset that investment.
Behind the scenes of Europe’s big A.I. summit
Prominent names in geopolitics and technology have gathered at the Artificial Intelligence Action Summit, the star-studded gathering convened by France to underscore Europe’s relevance in the A.I. race.
In a speech on Tuesday, Vice President JD Vance urged Europeans to go easier on rule-making. “We believe that excessive regulation of the A.I. sector could kill a transformative industry,” he said — mirroring a pitch by President Emmanuel Macron of France.
For Sam Altman, the C.E.O. of OpenAI, the meeting was largely focused on the economic opportunity and conditions needed to help other countries’ A.I. industries flourish. The big question Altman has heard, he told Bloomberg Television, is “Can you do a Stargate in my country?” referring to the expansive data center project he’s helping lead.
But there’s more happening behind the scenes. Kevin Roose, The Times’s tech columnist and co-host of the Hard Fork podcast, shares with DealBook what he’s hearing in the hallways of the Grand Palais:
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The big guessing game: What will President Trump do on A.I.? Some hope Elon Musk — who both runs an A.I. company and has expressed fears of powerful A.I. run amok — will persuade the president to take a more cautious approach. Others believe the venture capitalists and so-called A.I. accelerationists in Trump’s orbit, such as the investor Marc Andreessen, will persuade him to leave the A.I. industry alone.
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Europe is having regulation regrets. The European Union was ahead of the game on A.I. regulation, with its robust A.I. Act scheduled to go into effect in stages over the next year. Now, on the heels of a report by Mario Draghi, the former Italian prime minister, that blamed excessive regulation for Europe’s sluggish growth, some European leaders worry those rules are hurting the bloc’s competitiveness. Several American A.I. executives told me they still considered Europe a hard place to do business compared with bigger markets like India.
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A.I. doomers have been sidelined. There’s much less talk about A.I. risks than at previous summits. Partly, that reflects a deliberate decision by Macron to play up the positive side of the technology. It also reflects a larger shift in the industry, where executives seemed to have realized that it’s easier to get policymakers excited about A.I. if they’re not worried it’s going to kill them.
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Policymakers aren’t feeling the A.G.I. Though some industry leaders claim that artificial general intelligence, a human-level A.I. system, may be built as soon as a year or two from now, the discussions I’ve heard in Paris have lacked the urgency you’d expect, given those timelines. Policymakers can’t seem to grasp how soon powerful A.I. systems might arrive, and how disruptive they could be.
“Any hint of the selective suspension of congressionally authorized payments will be a breach of trust and ultimately, a form of default. And our credibility, once lost, will prove difficult to regain.”
— Five former Treasury secretaries — Bob Rubin, Larry Summers, Tim Geithner, Jack Lew and Janet Yellen — warning about the risks of the Elon Musk-led cost-cutting initiative interfering with the department’s payment system. That, and other efforts by President Trump to disrupt the federal government, have continued to draw opposition from judges, setting up a potential constitutional crisis.
Striking back at Trump’s tariffs
World leaders are scrambling to respond to President Trump’s latest trade-war salvo: his 25 percent tariffs on all steel and aluminum imports, with a warning that more measures, including reciprocal tariffs, are on the way.
Trump said the metals levies will go into effect “without exception.” But signs of tit-for-tat retaliation show growing risks of new trade barriers that could stifle growth and drive up costs for companies and consumers.
It isn’t just China. The European Union, which tallied a roughly $230 billion trade surplus with the U.S. last year, and Canada, America’s biggest steel supplier, have said they are ready to fire back.
The European Commission’s president, Ursula von der Leyen, condemned the tariffs this morning as “unjustified,” adding that they “will trigger firm and proportionate countermeasures.” On the sidelines of a major A.I. event in Paris, Prime Minister Justin Trudeau of Canada said “Canadians will stand up strongly and firmly if we need to.”
Meanwhile, Cynthia Kiang, Taiwan’s deputy economy minister, is expected to arrive in Washington on Tuesday to try to extract exemptions for the island’s huge semiconductor industry.
Market winners and losers are emerging. S&P 500 futures are in the red. Gold, the classic haven for investors, continues to trade around a record high.
European auto stocks were down: Germany’s automotive industry is viewed as especially vulnerable to a Trump trade war.
Trump called the tariff move a “big deal.” He has long regarded America’s ballooning trade deficit as a sign of weakness, and he sees tariffs as a tool to renegotiate trade deals and restore manufacturing jobs. “It’s time for our great industries to come back to America,” the president said from the Oval Office on Monday.
That could be a tall order. The U.S. long ago lost its lead as the world’s biggest manufacturing power to China, a dominant producer of ships, robots and 5G equipment, according to Deutsche Bank.
THE SPEED READ
Deals
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Stripe, the payments giant, is said to be weighing another sale of employee shares, this time at a valuation of at least $85 billion. (The Information)
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Elliott Investment Management has reportedly amassed a stake in Phillips 66 worth at least $2.5 billion, and plans to push the oil refiner to improve its operations. (WSJ)
Politics, policy and regulation
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Speaker Mike Johnson is said to be seeking support for a new federal budget plan, as House Republicans feud over how many trillions in cuts to include. (Politico)
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Microsoft is reportedly under investigation by France’s antitrust regulator over whether the tech giant is degrading search results for smaller rivals that use its Bing search engine. (Bloomberg)
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