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Aug 13, 2023

Stability AI cofounder sold stake now worth over $500M for $100—after being duped, says lawsuit

Posted by in categories: finance, robotics/AI

Cyrus Hodes alleges that CEO Emad Mostaque deceived him into selling his 15% stake for $100—three months before the startup reached a $1 billion valuation. His stake would be worth over $500 million now.

Mostaque convinced Hodes “that the company he had helped build was essentially worthless,” leading him to sell his shares to him in October 2021 and May 2022, according to a complaint filed in San Francisco federal court on July 13.

“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,” the complaint states. “More recently, the company has been in the marketplace seeking funding at a valuation of $4 billion.”

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