Chatbot Platform Character.AI Files For Bankruptcy, Disney To Buy Some Assets
According to Character.AI's proposal, Disney will be a "stalking-horse" bidder - an initial prospective buyer - for a non-exclusive perpetual license to some intellectual property. Other bidders can top Disney's offer.
Chatbot service Character.ai has announced it is filing for Chapter 11 bankruptcy protection, according to the company's announcement on Monday. The reason for this move, according to Character.ai, is the company's struggle with high operating costs and increasing legal troubles. The startup, which has been operating for four years, has been embroiled in a series of lawsuits, some of which allege that the AI companions provided by the platform have contributed to users harming or even killing themselves.
In exchange for this bankruptcy protection, Character.ai has agreed to sell some of its intellectual property to Disney Worldwide Services, a subsidiary of the Walt Disney Company. The deal is valued at $20 million, and will also involve "transition services" to help Character.ai continue operations, at least temporarily. Disney has been granted the role of a "stalking horse" bidder in these proceedings, meaning other potential buyers will also be able to submit competing bids.
Character.ai's CEO, Colin Adams, stated in a statement that the company has taken significant steps to stabilize its business amid ongoing legal and operational challenges. After evaluating various options, the company's board of directors concluded that this court-supervised sale process presents the best chance for the company to maximize value for all stakeholders.
Character.ai's platform is still operational, and the company anticipates the sale process to be finalized by November or early December.
Written by urgent.news from Fast Company's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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