Have you heard the story of Apple co-founder Ronald Wayne who sold his 10% stake in the company he launched with a couple of guys named Jobs and Wozniak for $800? Here’s a story like that, and maybe more shocking.
Cyrus Hodes is a co-founder of an AI company called Stability AI He owned 15% of the startup, but because he said he was led to believe that the company was going under and his stock would be worthless, he dumped all of it for $100.
Hodes is on the legal warpath and has sued CEOMohammad Emad Mostaque and the company. He says he was tricked into selling his stake in the company, according to wording in the legal docs. “Specifically, in October 2021 and May 2022, Mostaque purchased from Hodes his entire 15% stake in Stability AI for only $100.00, having led Hodes to believe that the company he had helped build was essentially worthless.”
That just wasn’t the case. And that is why the battle lines have been drawn. Here are more details from the lawsuit. “But just a few months later, in August 2022, the company engaged in a seed funding round in which venture capital firms invested $101 million at a post-money valuation of $1 billion. More recently, the company has been in the marketplace seeking funding at a valuation of $4 billion. At that valuation, the shares that Mostaque purchased from Hodes for a mere $100.00 would have a market value of over half a billion dollars (on an undiluted basis).”
The company is doing some exciting things in AI and received rave reviews for its text-to-image product. Investors have been clamoring to red hot AI stocks, but Hodes said his old partner told people that AI will be the biggest bubble ever.
Things are getting ugly. Hodes claimed that Mostaque embezzled company funds to pay the rent on a London apartment and has a history of cheating investors in past deals.
I’m not sure if this will help Mr. Hodes, but if Ronald Wayne had held on to his stake in Apple instead of selling it for $800, he’d have a net worth of about $450 billion. So I guess it could be worse.
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