Character.ai, the AI companion app maker, filed for Chapter 11 bankruptcy on Oct. 12 to run a court-supervised sale, with Disney agreeing to be the opening "stalking horse" bidder at $20 million to license some of its technology, CNBC reported.
On Oct. 23, 31 states and the District of Columbia objected to the proposed sale rules in Delaware bankruptcy court, PPC Land reported, arguing they shut out rival bids that would bring in more money.
The fight
- Under the proposed rules, a rival bid must be at least $21.7 million. The states say any bid above about $15.2 million would actually net more, because Character.ai keeps $5.5 million Disney already paid no matter who wins.
- They want the court to deny or cut Disney's $700,000 break-up fee and give bidders more time.
- A hearing on the bidding rules is set for Oct. 30. Bids are proposed to be due Nov. 20, with a sale hearing Nov. 24.
- According to the objection, 66 of about 86 full-time employees took jobs with Disney.
What it means for users
The company says the app is still running and subscriptions remain active. It expects the sale to wrap up by the end of November or early December. If no workable bid comes in, "the platform will be wound down," it said.
In its filing, the company said AI entertainment "has proven to be costly to develop and grow," and pointed to litigation and regulatory costs.