Elon Musk, the world’s richest person with a $700 billion fortune to match that claim, has done something about it—by suing OpenAI and Microsoft. He is asking for between $79 billion and $134 billion in damages. Musk argues that OpenAI— which he co-founded in 2015 with a massive $38 million seed donation —has left its original nonprofit mission. He thinks this change is equivalent to cheating him.
Musk’s legal action hinges on claims that OpenAI’s pivot towards profit-driven motives has resulted in immense financial gains, leaving him without his fair share as an early investor. So what’s his legal team’s argument that he should be compensated? They think it should at least be in line with the company’s dramatically augmented worth since inception. In particular, they contend that Musk’s investment will return up to 3,500 times its initial contribution.
Perhaps most startlingly, C. Paul Wazzan, Musk’s financial economist and expert witness, has produced an astonishingly high estimate. He thinks OpenAI has illegally accrued anywhere from $65.5 billion to $109.4 billion as a result of its pivot away from its initial mission. According to Wazzan, Microsoft has a 27% ownership of OpenAI. He projects that the company has reaped up to $25.1 billion in illegal profits.
The case will be heard in Oakland, California. No wonder Musk’s lawyers are getting creative with their arguments, claiming that he is entitled to payouts well over 25 times his initial investment. They ground this assertion in OpenAI’s strong current valuation of its commercial operations and its irreplaceable partnership with Microsoft.
In response to Musk’s allegations, OpenAI has issued a letter to investors warning them that Musk is likely to present “deliberately outlandish, attention-grabbing claims.” This statement further highlights the polemical tenor of the lawsuit, as well as the stakes for each side.
Musk’s quest for a potentially lucrative payday raises some troubling implications for future investments in AI startups. It does pose a question to founders on what they owe to early backers. The potential ramifications of this case on how startups are financed can hardly be overstated. It would reshape the boundaries of investor rights in the tech sphere.
As these legal arguments play out, the full fiscal impact on either OpenAI or Microsoft is unclear. Stakeholders across the technology sector have been watching this case intently. They’re especially excited given Musk’s incredible influence and resources to shake up the industry.