Reaches Stalking Horse Agreement to Sell Certain Assets to Affiliate of the Walt Disney Company

Character Technologies Inc. (“Character.ai” or the “Company”), a pioneering artificial intelligence entertainment platform, today announced that it has commenced a voluntary Chapter 11 case in the U.S. Bankruptcy Court for the District of Delaware (the “Court”) to facilitate a value-maximizing sale of all or substantially all of its assets (the “Sale Process”). The Company intends to continue operating its platform as it conducts the Sale Process.

Before the Chapter 11 filing, the Company entered into an agreement with Disney Worldwide Services, Inc. (“Disney”) under which Disney will serve as stalking horse bidder for a non-exclusive perpetual license of certain Company intellectual property and certain Company claims, in exchange for $20 million and Disney’s provision of transition services using former Company employees it has hired. These transition services will help the Company safely operate using its platform for a limited period of time and support its sale process. The transaction is subject to higher or better offers under section 363 of the Bankruptcy Code.

In connection with today’s filing, the Company has filed a motion for approval of bidding procedures to govern the Sale Process. The proposed bidding procedures are designed to achieve the highest or otherwise best offers for the Company’s assets and seek approval to designate Disney a stalking horse purchaser for certain of the Company’s assets. Under the timeline set out in the proposed bidding procedures, the Company anticipates that the completion of the Sale Process and the closing of any resulting transactions will occur in late November or early December 2026.

“Over the past year, Character.ai has taken meaningful steps to sustain and improve its business in the face of significant legal, regulatory, and operational headwinds,” said Colin Adams, CEO of Character.ai. “After a comprehensive review of the available alternatives, the board determined that this court-supervised sale process provides the Company with the best opportunity to maximize value for all stakeholders. As we navigate this process, maintaining a safe and engaging user experience for our Character.ai community remains a top priority.”

During the Sale Process, the Company expects to continue operating its business, including the Character.ai platform, with minimal disruptions to service. To that end, the Company has filed a number of customary “first day motions” that, upon Court approval, will enable the Company to, among other things, continue paying wages and benefits to employees, honor commitments to platform users and satisfy obligations to vendors and partners incurred after the filing date. To the extent the Sale Process does not result in a purchase that provides for a continuation of the Character.ai platform, the platform will be wound down.

Additional information relating to Character.ai’s Chapter 11 case, including court filings, can be found at https://cases.stretto.com/chartech, a website administered by Character.ai’s claims and noticing agent, Stretto, Inc.

Advisors

The Company has engaged Wilson Sonsini Goodrich & Rosati, P.C., as legal adviser, Areté Partners, LLC, as restructuring advisor, and Houlihan Lokey Capital, Inc., as investment banking advisor. Disney has engaged Skadden, Arps, Slate, Meagher & Flom LLP, as legal advisor.

About Character.ai

Founded in 2021, Character.ai is a leading AI entertainment platform that empowers users to connect, learn, and tell stories. Powered by multimodal technologies, Character.ai offers immersive experiences that spark curiosity and provide endless ways to explore. With its modalities like Chat, Books, Series, and Comics, users can create, roleplay, and build worlds, becoming an active participant in their own entertainment. For more information, please visit https://character.ai/.

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