The most extraordinary effort follows the cases launched by Musk last year due to the attempt of OpenAI, founded as a non-profit dedicated to ensuring AI that benefits humanity, to change its structure as a for-profit company.

Musk co-founded OpenAI with Altman and nine more in 2015, and was the most important early funder before leaving the board in 2018 after clashing with Altman.

OpenAI launched a for-profit subsidiary a year ago to raise outside capital, including more than $13bn away from its biggest backer, Microsoft. However, the non-profit entity, along with its employees and investors, currently owns that for-profit subsidiary.

OpenAI is trying to be a public benefit corporation, a type of for-profit entity committed to improving society. The company suggested that the non-profit’s “significant interest” in the existing for-profit would take the form of PBC shares at a fair valuation, which it said would be determined by independent financial advisors.

The PBC will run and control OpenAI’s operations and business, while the non-profit will “pursue charitable initiatives in sectors such as healthcare, education and science”, the company wrote in a post on the December blog.

In his letter, Musk’s lawyer pushed the attorneys-general to allow outside investors to bid for a stake in the OpenAI non-profit. If successful, that could allow an outside investor to gain a significant position in, and exercise control over, the startup.

The proposed change to a PBC also means that the non-profit entity will cease to manage OpenAI’s business and operations. A person familiar with the situation said the powers could be worth billions of dollars.

In the letter, Toberoff suggested that an auction is the only way to ensure that the nonprofit receives maximum value for its assets and maintains its fiduciary duties.

The non-profit’s stake in the public benefit corporation is likely to be worth tens of billions of dollars, according to a person with knowledge of the matter.

The head of Tesla and confidante of the US president-elect Donald Trump previously accused Altman of “fraud of Shakespearean proportions”, saying that OpenAI and Microsoft have deviated from the original mission of the startup.

OpenAI said in December that its conversion to a PBC would “result in one of the most resource-rich nonprofits in history” and increase the donations made by early supporters — including Musk — “many-fold.” .

The corporate governance complex came under scrutiny when Altman was ousted from the non-profit board in November 2023, and the company has since weighed more conventional arrangements.

Musk, who founded his own AI start-up xAI in 2023, has recently stepped up efforts to derail the OpenAI conversion.

In November, he sought to block the process of a request for a preliminary injunction filed in California. Meta is also throwing its weight behind the suit, which is the fourth Musk has launched against OpenAI.

In legal filings from November, Musk’s team wrote: “OpenAI and Microsoft have jointly exploited Musk’s donations so they can build a monopoly for profit, one that now specifically targets xAI, too much .”

Kathleen Jennings, attorney-general of Delaware – where OpenAI is incorporated – has since said that her office is responsible for ensuring that the conversion of OpenAI is in the public interest, and determining whether the transaction is at a fair price.

Members of Musk’s camp – wary of Delaware authorities after a state judge rejected a proposed $56bn compensation package for the Tesla boss last month – read as a rebuke of his efforts to block the conversion, and worry that it will be rushed. They also argued that PBC’s conversion to OpenAI should take place in California, where the company has its headquarters.

In a legal filing last week Musk’s lawyers said Delaware’s handling of the matter “doesn’t inspire confidence”.

OpenAI committed to becoming a public benefit corporation within two years as part of a $6.6bn funding round in October, giving it a valuation of $157bn. If it fails to do so, investors can get their money back.

There are many issues that OpenAI has yet to resolve, including the negotiation of the amount of Microsoft’s investment in PBC. A conversion is not imminent and is likely to take months, according to the person with knowledge of the company’s thinking.

OpenAI declined to comment. The attorneys general of California and Delaware did not immediately respond to a request for comment.