Stability AI Explores Sale Options as Investors Call for CEO Emad Mostaque’s Resignation
Stability AI is reportedly exploring the possibility of selling the AI company, as tensions with its investors rise.
In the face of escalating financial challenges, artificial intelligence (AI) startup Stability AI is reportedly exploring the possibility of selling the company. Tensions between Stability AI and its investors, particularly with major stakeholder Coatue Management, have reached a critical point.
Coatue, which led a funding round valuing the startup at $1 billion, has called for the resignation of CEO Emad Mostaque. The demand, outlined in a letter to management cites concerns about Mostaque’s leadership, the departure of senior managers and the startup’s precarious financial situation.
To that end, it has entered into preliminary discussions with multiple companies, strategically positioning itself as an attractive acquisition target, as reported by Bloomberg — citing undisclosed sources. However, a conclusive deal is not on the immediate horizon, and the startup may ultimately opt against selling.
“While several parties have expressed interest in the purchase of Stability AI, we are not trying to sell the company and are focused on releasing leading models,” a spokesperson for Stability AI told Bloomberg.
Among the potential buyers approached by Stability AI was Cohere, a Canadian startup specializing in AI technology, the report indicated. However, Cohere declined to enter into discussions. Stability AI also reached out to Jasper; an AI startup focused on assisting companies in creating marketing materials.
Stability AI’s Recent Rollercoaster
Early this month, Metaverse Post reported that the AI startup secured investment under $50 million in the form of a convertible note, from American semiconductor giant Intel. Intel’s investment comes on the heels of the tech giant’s announcement in September regarding the development of an AI supercomputer utilizing Xeon processors and 4,000 Gaudi2 AI processors.
However, a few days later the startup’s Vice President Ed Newton-Rex, announced his resignation opposing the company’s claims that using copyrighted content for AI training is “fair use.”
“I’ve resigned from my role leading the Audio team at Stability AI because I don’t agree with the company’s opinion that training generative AI models on copyrighted works is ‘fair use,’” wrote Ed Newton-Rex, on X ( Twitter).
“To be clear, I’m a supporter of generative AI. It will have many benefits - that’s why I’ve worked on it for 13 years. But I can only support generative AI that doesn’t exploit creators by training models - which may replace them – on their work without permission,” he added.
In 2022, Stability AI achieved unicorn status while raising $101 million, drawing investors with its software’s ability to generate striking images based on minimal prompts. However, concerns arose as the company’s expenses including bills and payroll, surpassed its revenue.
In the face of financial scrutiny and investor pressure, Stability AI stands at a crucial crossroads. The decision on whether to proceed with a potential sale, coupled with uncertainties surrounding CEO Emad Mostaque’s position, will significantly shape the company’s future.
As the industry watches closely, the coming days will unfold the next strategic steps, determining the company’s resilience and trajectory in the evolving landscape of artificial intelligence.
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