Character.AI bankruptcy: Disney bids $20m for what Google valued at $2.7bn

Character.AI filed for Chapter 11 on 12 October and named Disney as lead bidder for part of its assets, including a licence to its intellectual property, at $20m. The platform runs an LLM behind millions of invented characters, and users talk to them for about 75 minutes a day. The court-supervised sale stays open to higher offers and should close in late November or early December.

Two prices for one technology

Two years ago Google paid $2.7bn for a non-exclusive licence to the same technology and for the return of founders Noam Shazeer and Daniel De Freitas. The Disney bid equals 0.74% of that. Twenty-six months separate the two prices, and the second is one hundred and thirty-fifth of the first.

“The 163 million users of the platform are not creditors in this case”

— Character.AI, Court filing, 12 October 2026

Character.AI told the court that its 163 million registered users are not creditors. Spread across them, $20m works out at 12 cents a user. Against the 20 million who open the app in a month, down from 28 million at the 2024 peak, it comes to one dollar each.

Who is left holding it

Disney sent a cease and desist in September 2025 over users building unauthorised versions of its characters. Character.AI says it removed them, which left the platform without the names people came for. The company that pressed the claim now holds the lead bid for what is left of the defendant.

The IMF warned yesterday about circular financing between large AI buyers and weaker AI firms, $300bn of transactions backed by $650bn of debt, and we measured that warning against the crypto market. This is the other end of the same pipe: a licence deal that set a price in 2024, and a bankruptcy auction setting a different one in 2026.

Disney's two AI cheques sit oddly together. It put $1.5bn into Epic Games in 2024, and this week that project lost its release date while the studio bid $20m for the remains of a company it sued, which is 1.3% of the Epic cheque.

What settles by December

Three things settle by December. Whether a rival bid lifts the price above $20m. Whether the platform keeps running through the sale, as the company promises. And what Disney does with a character engine whose builders left for Google two years ago.

Informational material, not investment advice. The $20m is a lead bid in a court-supervised sale, so a rival offer can still change the number before the process closes.