Chatbot pioneer Character.AI files for bankruptcy – Disney bids 20 million dollars
The start-up, once valued at 2.5 billion dollars, has filed for Chapter 11 protection. Disney wants to buy parts of the business, but other bidders can still top its offer.
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Character Technologies, the company behind chatbot platform Character.AI, filed for Chapter 11 bankruptcy protection on Monday, Benzinga reports, citing court documents. Assets and liabilities are each estimated at 50 to 100 million dollars. The Walt Disney Company has agreed to buy selected assets, including intellectual property, for 20 million dollars, subject to court approval.
Disney is acting as the so-called stalking-horse bidder: its offer sets the floor price, and other interested parties can bid more at an auction. The sale could close in late November or early December. The company says the platform will keep running with minimal disruption until then; if no buyer wants to operate it, the business would be wound down. According to CEO Colin Adams, a court-supervised sale offers the best opportunity to maximise value for all stakeholders.
Character.AI was one of the best-known AI risers of the ChatGPT era. In 2024 Google licensed the start-up's technology and brought back its founders and part of the team, in a deal valued at 2.7 billion dollars. Since then Character.AI has focused on its chatbot app but came under pressure from several lawsuits, banned open-ended chats for users under 18 and, according to media reports, lost users – from around 28 million to about 20 million a month – as OpenAI, Meta and Replika expanded similar offerings.