Musk and Altman take their battle from court to Wall Street ahead of landmark IPOs

Elon Musk lost his lawsuit against OpenAI CEO Sam Altman on Monday, ending one round in the fight between the former friends and co-founders, and setting the stage for an even bigger battle as the billionaires gear up to lead potentially record-setting initial public offerings.

Musk's SpaceX, which was valued at $1.25 trillion in February after merging with artificial intelligence startup xAI, is planning to disclose its prospectus as soon as this week. Altman's OpenAI, which Musk helped start in 2015 before a contentious split that led to the eventual lawsuit, is valued at more than $850 billion and is eyeing a possible market debut later this year.

Only two tech companies — Facebook and Alibaba — have been valued at even $100 billion after their first day of trading on U.S. exchanges.

"The big picture is the theater is now done," Gene Munster, managing partner at Deepwater Asset Management, told CNBC's Kelly Evans on Monday. "Now we get to the substance of seeing what these companies can do to really build massive businesses around AI."

Both SpaceX and OpenAI have complicated stories to tell, and for investors to buy in at such elevated prices, they have to be confident in top leadership. That's particularly true when it involves polarizing figures like Musk, the world's richest person, and Altman, who was briefly ousted by his own board less than three years ago.

The past three weeks served as a dramatic distraction in what's been a multiyear race to develop the world's leading AI models and tools, with Altman and Musk, two of the main figures in the AI boom, facing off at a federal courthouse in Oakland, California.

In 2024, Musk sued OpenAI and Altman, alleging they abandoned a promise to keep the AI lab a nonprofit. The last two years featured a public war of words between the two sides.

An advisory jury determined on Monday that Musk waited too long to file the suit, a decision that was immediately adopted by District Court Judge Yvonne Gonzalez Rogers. The court did not address whether Musk's claims of "breach of charitable trust" were valid, but instead that they fell outside of a three-year statute of limitations.

Musk's attorneys said their client would appeal the verdict to the 9th Circuit U.S. Court of Appeals, and Musk, in a post on X, called the decision a "calendar technicality."

"There is no question to anyone following the case in detail that Altman & Brockman did in fact enrich themselves by stealing a charity. The only question is WHEN they did it!" Musk wrote.

The planned appeal is unwelcome news for SpaceX investors, said Ross Gerber, a long-time backer of Musk's companies who has criticized Musk for dividing his time and attention across too many businesses.

"He doesn't understand the way the public perceives him," said Gerber, CEO of Gerber Kawasaki. "He's perceived as being a sore loser. Another guy is successful and he's jealous."

Additionally, Gerber said, Musk isn't fooling anyone in trying to make the case that his concern is around the sanctity of nonprofit institutions. Last year, The New York Times reported, based on tax filings, that the Musk Foundation had neglected to give away the minimum amount required by law, and that most of its charitable giving went to organizations tied closely to Musk.

"The idea that somehow Elon is defending charities across America is the most laughable thing that could ever possibly happen," Gerber said. "He doesn't see how absurd he looks."

Even without the litigation, Musk has a big challenge on his hands laying out his long-term plans for SpaceX. The company's core business involves launching giant reusable rockets into space under government contracts. This week it's targeting a 12th test flight of Starship, including a new version of the rocket it plans to launch at its Starbase, Texas facility.

SpaceX also owns the Starlink satellite internet service, recently acquired xAI, which includes social network X, and last month said it signed a deal giving it the right to buy AI coding startup Cursor for $60 billion.

Musk has outsized control over the sprawling operation.

Last week, public pension system leaders, who collectively manage over $1 trillion in assets, wrote a letter to SpaceX executives, spelling out a litany of concerns they have over the company's "novel and extreme governance structure," and a lack of recourse for shareholders.

They also highlighted, "the competing demands on Mr. Musk's time and attention," noting that the milestone-based pay packages at SpaceX and Tesla put the two companies "in the unusual position of essentially competing against one another for the focused attention of their shared chief executive."

While the trial was a decisive victory for OpenAI, its end brings more relief than celebration. Altman can turn his full attention back to the other side of the Bay Bridge, where his company is based, but only after Musk's lawyers introduced a host of potential issues for prospective investors to consider.

The plaintiff's counsel repeatedly questioned Altman's character, accusing him of being untrustworthy, and of routinely lying. During his testimony, Altman was asked about a number of people who have expressed concerns with his behavior over the years, including Anthropic co-founder Dario Amodei, a former OpenAI employee.

Altman was also pressed about some of the board members who briefly fired him in 2023. The board said at the time that Altman was "not consistently candid in his communications" with them.

"I was not trying to deceive the board," Altman testified.

Then there's the money problem. Altman and other OpenAI executives testified that the company needs an extraordinary amount of capital in order to secure the computing resources required to train and run cutting-edge AI models.

The company has already raised more than $180 billion from investors, and continues to burn through cash at a historic pace. As Altman pushes towards an IPO, he's under pressure from investors to show that the numbers work, while facing increasingly stiff competition from rivals, most notably Anthropic, which is winning in the enterprise and the AI coding market.

Since the trial kicked off late last month, Anthropic has announced a new enterprise AI services company, agents for financial services and a major compute deal for capacity at the xAI Colossus 1 data center in Memphis, Tennessee.

Meanwhile, Altman is dealing with turnover in his upper ranks. While the trial was taking place, Greg Brockman, the company's president and another key defendant in the case, officially took over OpenAI's product strategy. Brockman assumed the added responsibility on a tentative basis in April after Fidji Simo revealed she was taking a significant medical leave because of a worsening neuroimmune condition.

OpenAI also has to reckon with the reality that SpaceX is likely to hit the public markets first, and that Anthropic is right on its heels, said Jake Dollarhide, CEO of Longbow Asset Management.

"Altman's courtroom victory lap may be short-lived, given that Musk and SpaceX and, in turn, xAI will be the first to go public and receive a likely boost from investors in the form of the 'first-mover' effect," Dollarhide said in an email. "If Altman is not careful, Anthropic could do the same with the next IPO and then OpenAI would be left holding the bag for whatever investor interest is left over as the potential third IPO among these AI royalties."

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