Court approves bidding procedures for the sale of Character.ai, with Disney as stalking horse

Background

Character.ai's assets are being sold through a court-supervised process in the US Bankruptcy Court. On 4 November 2026 the court entered an order approving the bidding procedures that govern the sale process.^[1] The same order approved a Transaction Notice setting out the terms of that process.^[1] Between them, the bidding procedures and the notice fix what is being offered, who may bid, and when each step happens.

The stalking horse

The order approved a Stalking Horse Transaction Agreement dated 13 October 2026 with Disney Worldwide Services, Inc., for the sale or licence of the "Disney Target Assets".^[1]

In a bankruptcy sale, the stalking horse is the bidder that signs an agreement before the public auction. Its offer sets a floor: other parties can see what the minimum is and what shape the transaction takes, and they bid against that agreement rather than starting from nothing. The seller's job is then to run a process open enough that a higher or better offer can appear, and the stalking horse usually receives some protection, such as a break-up fee, in exchange for setting the floor. A court order approving bidding procedures is what turns this into a formal process, with rules on how a bid is submitted and what it must contain.

The timetable

The order sets out a short, fixed calendar.

Objections to the sale are due on 18 November 2026 at 4:00 p.m. ET.^[1] Bids for any of the assets are due on 24 November 2026 at 12:00 p.m. ET.^[1] If more than one qualified bid arrives, an auction will be held on 1 December 2026 at 10:00 a.m. ET, unless it is cancelled or adjourned.^[1] The Sale Hearing, the court hearing at which a sale is presented for approval, is scheduled for 3 and 4 December 2026 at 9:30 a.m. ET.^[1]

The sequence matters. Objections close before bids do, so disputed questions can be aired ahead of the auction instead of at the hearing. The hearing itself is given two days, which leaves room for argument if the auction produces a contested result.

Advisers and the successor question

The debtor's proposed investment banker is Houlihan Lokey and its proposed counsel is Wilson Sonsini Goodrich & Rosati.^[1]

The proposed order approving a sale to Disney would find that neither Disney nor its buyer parties is a successor to the debtor.^[1] Successor liability is the idea that a buyer can, in some circumstances, be treated as carrying on the seller's business and so inherit claims against it. A finding that the buyer is not a successor is what makes the purchased assets clean: the business moves over without the claims that would otherwise follow it. That protection is part of why a buyer is willing to sign an agreement before anyone else has bid, and it is why the sentence in a proposed order is not a formality.

What to watch

Everything described here is procedure, but procedure decides the outcome. Disney has a signed agreement and has supplied the floor; other bidders have until 24 November 2026 to beat it; the auction on 1 December 2026 is where a real contest would become visible; and the hearing on 3 and 4 December 2026 is where the court decides whether to approve the result.

Case documents are posted at cases.stretto.com/chartech.^[1]