AI startup Stability lays off 10% of staff after controversial CEO's exit: Read the full memo

Beleaguered artificial intelligence startup Stability is laying off employees after the exit of its controversial former CEO Emad Mostaque.

Stability, which is behind the popular Stable Diffusion text-to-image model, made more than 20 of its employees redundant to "right-size" the business after a period of unsustainable growth, according to an internal memo obtained by CNBC.

The company's newly appointed co-CEOs Shan Shan Wong and Christian Laforte told employees in an email Wednesday night that the firm needed to "restructure parts of the business, which will sadly mean saying goodbye to some colleagues."

"Those who are affected by this have been notified individually and we will be supporting them throughout this period," Wong and Laforte, who were previously chief operating officer and chief technology officer at the company, respectively, said in the internal memo.

Stability AI's layoffs amount to about 10% of its global headcount, according to publicly available data online which shows the firm employs around 200 people in total.

The employees affected by the measures are mostly on the operational side of the business and have been notified of their redundancies, according to a person familiar with the matter who spoke with CNBC under condition of anonymity as they were not able to speak publicly on the matter.

Last month, Stability announced its former CEO, Mostaque, was leaving the company to "pursue decentralized AI," and would be replaced by Wong and Laforte.

Mostaque's departure follows media reports throwing doubt on his credentials.

A June 2023 Forbes report said that Mostaque misled people including his own investors about receiving a master's degree from Oxford University, as well as the nature of a partnership