Character.ai’s bankrupt parent has named Smirks and Pangs Acquisition LLC to pay $10 million in cash, plus certain assumed liabilities, for the app, its AI models, the brand and its users’ account data and chats. That is according to a notice filed on 14 November as Docket No. 164 in the US Bankruptcy Court for the District of Delaware, as reported by PPC Land. The buyer was formed in Delaware on 13 November, the day before it was selected, PPC Land reported from state records.
The assets are everything outside the license Disney agreed to take for $20 million, which we covered when Character.AI filed for Chapter 11 with the Disney bid. The notice makes Smirks and Pangs the opening bid that rivals must beat at the 1 December auction, PPC Land reported.
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The key insight: As we read the filing as PPC Land reported it, the data Disney chose not to license is now priced on its own: $10 million in cash for the app, the models and users’ account data and chats, from a buyer formed the day before it was selected.
The notice states the price as “the cash purchase price of $10,000,000, plus the assumption of certain specified liabilities, including cure costs for any assumed executory contracts”, according to PPC Land’s reading of the nine-page filing.
It lists 55 contracts the buyer would take over, PPC Land reported. Seven carry a cure cost, the sum needed to bring a contract current, and those total $2,684,462 by PPC Land’s calculation, almost all of it owed to DigitalOcean.
The bid protection is a Termination Payment of 3.5% of the consideration, or $350,000, the notice says. Disney’s deal carries a $700,000 break-up fee, also 3.5%, PPC Land reported.
The purchase agreement itself was not filed with the notice. The company says it will file it and a blackline against its form agreement “as soon as practicable”, and PPC Land reported that the docket showed no such filing by the morning of 15 November.
Stalking-horse cash prices and listed costs in the Character.ai bankruptcy; filings as reported by PPC Land, 15 November 2026.
Who the Buyer Is
Smirks and Pangs Acquisition LLC was formed on 13 November 2026 as a Delaware limited liability company under file number 10840241, PPC Land reported from the Delaware Division of Corporations. Its registered agent is United Corporate Services in Dover.
The notice says the buyer “does not have any connection to the Debtor other than those that arise from the Additional Stalking Horse Agreement”. PPC Land reported that neither the notice nor the Delaware registry names its owners, investors, managers or financing.
What Changes Hands for Users
The asset schedule covers the website and the iOS and Android apps, all AI models and weights, the CHARACTER.AI and C.AI trademarks, nine patent entries and nine domains including character.ai and c.ai, PPC Land reported.
Under Product Data, the schedule lists “All end-user account and profile information, user-created characters, chat content and related data, advertising and analytics data, training datasets and unprocessed data”, according to PPC Land.
Records of user and parental consents, ad opt-outs and age-assurance status are also listed, PPC Land reported, as property that changes hands “to the extent owned by Seller and transferable under applicable Law”.
Disney’s license had excluded “training data or any Finished Models, including each user-selectable conversational model or chat style”, along with the app, the trademarks and user data, PPC Land reported. The company’s first-day papers put current and past users at about 163 million, and its chief executive’s declaration counted about 12 million monthly active users, according to PPC Land.
The Privacy Fight Around the Data
On 14 October, attorneys general from 39 states and the District of Columbia set out nine conditions for any buyer of the user data, PPC Land reported.
On 12 November the company filed competing proposed orders directing the US Trustee to appoint an ombudsman, Docket No. 148, PPC Land reported. The Smirks and Pangs notice does not mention the ombudsman, minors or the states’ conditions, according to PPC Land. Our running tracker of chatbot liability cases follows the youth-harm and companion-chatbot cases.
We found no public statement from Character.AI or from Smirks and Pangs on the designation as of 15 November. The notice is the company’s own filing, signed by its counsel at Wilson Sonsini Goodrich and Rosati, PPC Land reported.
What It Costs, by Our Arithmetic
PPC Land calculated the cashprice at about six cents per current or past user, or about 83 cents per monthly active user.
By our arithmetic, $10 million is about four months of ad sales at the roughly $2.5 million a month Character.ai reached in August 2026, a figure PPC Land reported. Adding the $2,684,462 in listed cure costs gives about $12.7 million before other assumed liabilities, also our arithmetic.
The two stalking-horse cash prices, $20 million from Disney and $10 million from Smirks and Pangs, sum to $30 million, our arithmetic. Our Character AI business model page covers how the company makes money.
Objections and the Auction
Objections to the designation are due by 9 p.m. Eastern on 18 November, the notice says. If none is filed, the bidding procedures order says “the designation of the Additional Stalking Horse Purchaser shall be deemed approved without further notice or a hearing”, PPC Land reported.
Bids are due at noon on 24 November, the auction is set for 1 December and the sale hearing for 3 and 4 December, PPC Land reported. The form agreement lets either side walk away if the deal has not closed by 17 December, according to the same report.
The Structural Read
As we read the asset schedule PPC Land described, consent and opt-out records travel with the data only to the extent they are transferable, which puts the states’ conditions and the ombudsman request at the centre of the sale.
As we read the price, by our arithmetic $10 million is about four months of the roughly $2.5 million in monthly ad sales PPC Land reported for August 2026.
Docket No. 164, as reported by PPC Land
“All end-user account and profile information, user-created characters, chat content and related data, advertising and analytics data, training datasets and unprocessed data”
Three Implications
FOR USERS The schedule lists account information, user-created characters and chat content among the purchased assets, PPC Land reported.
FOR RIVAL BIDDERS Bids are due at noon on 24 November and the auction is set for 1 December, PPC Land reported.
FOR THE STATES Objections to the designation are due by 9 p.m. Eastern on 18 November, the notice says, as PPC Land reported.
The framework says: “Every AI paradigm produces a different kind of moat.”
As we read it, a chat app’s user conversations and models are the kind of accumulated data the framework describes; the framework does not discuss this story.
What Is Not Established
The purchase agreement and its definition of the Termination Payment are not public. Who owns or finances Smirks and Pangs is not stated in the notice or the Delaware registry, PPC Land reported.
The notice does not say whether the buyer plans to keep the app running, does not define the other assumed liabilities beyond cure costs, and gives no deposit or minimum overbid for these assets, according to PPC Land. We have not read the docket directly; the filing details here are as PPC Land reported them.
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A company formed one day before its selection is the opening bidder for Character.ai’s app, models and users’ chats at $10 million, per the 14 November notice as PPC Land reported it. Objections are due on 18 November; if none arrive, the bidding rules treat the choice as approved without a hearing.
A note on sourcing. Filing details come from the notice filed on 14 November 2026 as Docket No. 164 in Case No. 26-11603 (BLS), US Bankruptcy Court for the District of Delaware, as reported by PPC Land on 15 November 2026 and read in full that day; we did not read the docket directly. Per-user figures are PPC Land’s calculation; the ad-sales, cost and total comparisons are our arithmetic.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
