Character.AI Files for Chapter 11 and Agrees to Sell Assets to Disney
Character.AI has begun a Chapter 11 bankruptcy case in the United States and agreed to sell some of its assets to Walt Disney for $20 million. The filing was made in the bankruptcy court for the District of Delaware and is voluntary, the company said. Character Technologies, which owns the chatbot platform, put its estimated assets and liabilities between $50 million and $100 million in a court filing that also sets out the sale process.
Disney is acting as the lead bidder, known in such sales as a stalking horse, and the company is seeking court approval for auction rules that would give the studio that position. The licence Disney would receive is perpetual and carries no exclusivity, covering certain intellectual property and claims. Under the process, Disney's offer sets a baseline while competing bidders can submit higher ones.
But a stalking horse is a starting price rather than a sale. Character.AI expects the process to conclude around the end of the year, and a higher offer would displace Disney. The company has started the sale through the Chapter 11 case rather than outside court, which brings the terms under a judge's oversight.
Colin Adams, the chief executive, cast the decision as a search for value. He said the board had reviewed the alternatives available to it and determined that a sale under court supervision offered the best opportunity to maximise value for all stakeholders.
The platform is meant to keep running while the sale proceeds. Character.AI said it intends to continue operating its business with minimal disruption to services during the process, and that the platform is not being shut down as part of the filing. No timetable has been published for changes that customers would notice, and the company has not said how many approaches it received before choosing this route.
And the alternative is stark. If the process fails to produce a buyer willing to keep the platform running, Character.AI will be wound down. That condition sits in the company's own account of the filing, and it makes the auction a question about the product's survival rather than only its ownership.
The $20 million covers a licence rather than the whole business. Disney's bid also includes transition services it would provide, part of what the court will weigh alongside the price. Other assets included in the sale have not been itemised publicly.
What the filing does not settle is who ends up with the platform, or on what terms. The court must approve the auction rules before Disney's position as lead bidder is fixed, and competing bids could change the outcome. The company has not published a list of assets excluded from the sale, and the filing does not set out which parts of the business the licence would touch.
So the company is selling under court supervision, with the process expected to close around the turn of the year. Disney holds the opening bid, the service stays live for now, and winding the business up remains the stated fallback if no buyer continues it. Which of those outcomes arrives depends on the auction.
Character.AI has begun a voluntary Chapter 11 case in the District of Delaware and agreed an asset sale to Disney for $20 million
Disney is the stalking horse bidder for a non-exclusive perpetual licence to certain intellectual property and claims
Character Technologies listed estimated assets and liabilities between $50 million and $100 million
The platform keeps operating during the sale, but will be wound down if no buyer agrees to continue it
Source: Reuters
