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Character.AI has filed for Chapter 11 bankruptcy in the United States and agreed to sell some of its assets to Disney for 20 million dollars. The company announced the move on 13 October, starting a court-supervised sale process that will decide the future of the popular AI companion app.
The filing was made in the bankruptcy court in Delaware. Character.AI said it had begun the formal process to sell assets, including a licence for some of its intellectual property, and was asking the court to approve auction rules. Disney has been named as the lead bidder, known as the stalking horse, which sets a baseline offer that other buyers can try to beat. The company expects the sale process to finish by late November or early December.
Disney's offer covers a non-exclusive, perpetual licence to some of Character.AI's technology, rather than the platform itself. It does not include the consumer app, the brand or user data, including private chats. That distinction matters to the platform's users, because the app will only keep running if a buyer steps forward to take it on. Character.AI has said it will wind the platform down if no such bid succeeds.
The company, which lets people chat with AI characters, had about 12 million monthly active users at the time of the filing, according to its chief executive's court statement. Court papers also showed it was losing around eight to nine million dollars a month. It listed estimated assets and liabilities of between 50 and 100 million dollars.
The case has also raised questions about what happens to user conversations held by the company. State attorneys general later warned that chat data could be transferred to a new owner through the bankruptcy, and they called for a privacy ombudsman to oversee the process. The court will hear those concerns as the auction moves ahead.
Source: Moneycontrol
