Popular artificial intelligence (AI) platform Character.AI has formally filed for bankruptcy protection in a US court. Alongside its filing under Chapter 11 of the US Bankruptcy Code, the company has reached an agreement to sell certain assets and intellectual property to entertainment giant Walt Disney for $20 million.

Through this court-supervised auction and sale process, the AI startup is attempting to address its financial difficulties.

Disney Positioned as the Lead Bidder

Subject to court approval, Disney’s offer will be treated as a “stalking horse bid,” serving as the initial benchmark for the sale. This means that although Disney has established the preliminary price, other competing companies may participate in the auction by submitting higher offers.

The sale process is expected to be completed by late November or early December.

In a statement, Character.AI CEO Colin Adams said that, after reviewing the current circumstances, the company had chosen a court-supervised sale process to maximise the protection of the financial interests of all stakeholders.

According to court documents, the company’s estimated assets and liabilities are valued at between $50 million and $100 million.

Platform Operations and Future Uncertainty

Character.AI has announced that it intends to continue normal platform operations with minimal disruption while the sale process is underway. However, if no suitable buyer is found to take over the platform following the process, all its operations could be permanently discontinued.

The development has sparked considerable discussion across the technology industry, highlighting the challenges AI companies face as they struggle to survive in a rapidly changing and increasingly competitive market.

//DBTech/BMT/OR//