Character.AI files for Chapter 11, Disney bids $20M

One of the best known AI companion apps is for sale, and the opening bid is $20 million.

Character Technologies, the company behind Character.AI, filed a voluntary Chapter 11 case in the U.S. Bankruptcy Court for the District of Delaware on Oct. 12, according to its claims agent's case site. The case is No. 26-11603. The company says it is seeking to sell all or substantially all of its assets, according to its announcement as relayed by Unite.AI.

Disney sets the floor

Disney Worldwide Services is the stalking horse bidder: it sets the opening offer, and others can top it. Its bid is $20 million for a non-exclusive, perpetual license to certain Character.AI intellectual property and claims, plus transition services through former Character.AI employees Disney has hired, according to the same announcement.

Character Technologies listed estimated assets and liabilities in the range of $50 million to $100 million, Reuters reported, citing a court filing.

The company expects the sale to close in late November or early December. It says it will keep the platform running during the process, with minimal disruption. If no buyer wants to keep it going, it will be wound down.

Chief Executive Colin Adams said the board "determined that this court-supervised sale process provides the company with the best opportunity" to maximize value for all stakeholders, per Reuters.

The Disney tie predates the bid. Character.AI's own blog said on Sept. 18 that then-CEO Karandeep Anand was joining Disney as senior executive vice president and chief technology officer, and that he expected members of Character's technical team to join him.

A license is all the first bidder wanted

Read the terms closely. Disney is not bidding for the company or the app. It is bidding for a non-exclusive license to some IP and claims, and its transition help comes from people who already work for Disney.

Non-exclusive means the rest is still on the table for anyone else.

That is a hard number for the consumer AI chatbot business. One of the category's best known names opens at $20 million, for a license.

What to do if you use it, or build like it

If you use Character.AI, nothing breaks today. The company itself says the platform shuts down if no buyer wants to run it. Save the conversations and characters you care about while the service is up.

If you build a consumer chat app, this is the downside case in public. The first buyer to show up valued the IP license and the team. Ask what in your product a buyer would pay for if the app itself were worth nothing to them.

Watch the auction

The court has to approve the bidding procedures first. Then watch two things: whether anyone tops $20 million, and whether the winner wants to run the app.

If nobody does, Character.AI goes dark. Save your chats.