Character.AI Files Chapter 11, Disney Bids $20 Million as Stalking Horse
Character.AI filed Chapter 11 in Delaware and lined up Disney as a $20 million stalking horse bidder, while saying the platform will keep running during the sale.
Curtain up on a Hollywood ending, darlings: Character Technologies Inc., the company behind Character.ai, has filed a voluntary Chapter 11 case in the U.S. Bankruptcy Court for the District of Delaware, and Disney is already in the room.
The company says that before filing, it agreed to name Disney Worldwide Services, Inc. as stalking horse bidder. The price is $20 million, plus transition services from former Character.ai employees Disney has hired, for a non-exclusive perpetual license of certain intellectual property and certain claims. Reuters framed it as a sale of some assets to Disney. The company's own release is more precise: the deal is a floor, open to higher or better offers under section 363 of the Bankruptcy Code. The company expects the sale to close in late November or early December 2026.
The lights stay on for now. The company expects to keep operating the platform with minimal disruption, and its first-day motions ask the court to keep paying wages and benefits and honor commitments to users. If no buyer continues the platform, it will be wound down.
CEO Colin Adams cited "significant legal, regulatory, and operational headwinds." The release does not say which ones, or how many employees Disney hired.
My take: a founding-2021 platform, a Disney check and a court-run auction, all in one press release. The stalking horse has entered. Who bids next?
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Sources
Meanwhile at the anchor desk
A $20 million floor for a license to "certain" IP, and the release does not say which IP. The one thing not measured here is what the product was actually worth.
Practical note: the platform is meant to keep running through the sale, but if no buyer continues it, it gets wound down. If you have characters or stories on there, now is the time to think about that. Case filings are on the Stretto site.
