Report: Stability AI Positioning Itself for Acquisition

Stability AI, a British artificial intelligence (AI) startup, is reportedly considering selling the company amidst mounting pressure from investors over its financial position.

The London-based firm has engaged in preliminary discussions with multiple companies, positioning itself as an attractive acquisition target, Bloomberg reported Wednesday (Nov. 29), citing unnamed sources. However, a deal is not imminent, and Stability AI may ultimately decide against selling.

Stability AI did not immediately reply to PYMNTS’ request for comment.

A company spokesperson told Bloomberg: “While several parties have expressed interest in the purchase of Stability AI, we are not trying to sell the company and are focused on releasing leading models.”

The tensions between Stability AI and its investors have escalated, particularly with Coatue Management, which led a funding round that valued the startup at $1 billion, according to the report.

In a letter to management, Coatue called for the resignation of Stability AI CEO Emad Mostaque, citing concerns about his leadership, the departure of senior managers and the startup’s precarious financial situation, the report said.

In response, the Stability AI spokesperson told Bloomberg that Mostaque’s leadership has been instrumental to the company’s success and emphasized the confidence investors have shown in the company through recent investments.

Among the potential buyers approached by Stability AI was Cohere, a Canadian startup specializing in AI technology, according to the report. However, Cohere declined to enter into discussions. Stability AI also reached out to Jasper, an AI startup focused on assisting companies in creating marketing materials.

In 2022, Stability AI achieved unicorn status while raising $101 million, as investors were drawn to its software’s ability to generate striking images based on minimal prompts, the report said.

However, the company’s expenses, including bills and payroll, surpassed its revenue, leading to concerns about its financial sustainability. Stability AI was spending about $8 million a month on bills and payroll in October. The company generated $1.2 million in revenue in August and was projected to earn $3 million in November from software and services.

In a statement provided to PYMNTS on Nov. 9, when it was reported that Stability AI had raised about $50 million in financing, a company spokesperson said: “Stability AI is in a strong, healthy position to continue its world-leading work in generative AI. We’ve increased revenues tenfold over the last year and we’re on target to increase them further by the end of the year as we continue to roll out new products.”

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