Disney Agrees to Hire Majority of Character.AI Workforce in Stalking Horse Bid

According to TechCrunch, after chatbot startup Character.AI filed for bankruptcy earlier this week, entertainment giant Disney has agreed to make employment offers to at least 60 Character.AI employees—the majority of its workforce—with an estimated $60 million in annual compensation. These details emerged from a legal filing spotted by Bloomberg.

Previously, Character.AI’s former CEO Karandeep Anand joined Disney as its first Chief Technology Officer (CTO), and the startup had stated that Disney agreed to acquire some of its assets for $20 million. The new hiring agreement further solidifies Disney's absorption of Character.AI's core engineering team.

Notably, this is a "stalking horse" bid. In bankruptcy proceedings, such an initial bid sets a floor price for assets and encourages other potential buyers to participate. Therefore, although the filing states that the vast majority of offered employees accepted, another company could still come forward with a higher offer to change the final outcome.

Despite having a large and engaged user base, Character.AI was hobbled by high costs and potential litigation-related liabilities and regulatory engagement. The company faced a lawsuit from the mother of a 14-year-old boy who alleged her son committed suicide after becoming obsessed with one of its chatbots, and it also faced government investigations over child safety concerns. These risk factors likely contributed significantly to its eventual bankruptcy.