[00:00] What if I told you there was a company in the AI space that had $18 billion of short-term bills to pay? Literally, we gotta make payments on this stuff within the next 12 months. And they had just $6 billion of cash, and they just had to raise money at even less desirable rates than they're letting on.
[00:21] Well, that company is called CoreWeave. And this isn't to bag on CoreWeave, it's the question, hey, wait a second, how sustainable is this? Here's the balance sheet proof so you know I'm
[00:33] not making it up, but here's what's worse. This is all of the debt that they owe. And at the bottom, they say the company's weighted average cost of capital is just 9%. They make it seem like, hey, we're not borrowing at distressed pricing. According to the Wall Street Journal,
[00:48] Coreweave actually had to sell their debt at a discount leading to a higher than 10% effective yield. Here's how that works. Let's say you sell $100 of debt at a 9% yield. The
[01:03] investor is getting $9 on that $100 of debt, right? 9%. Weighted average cost of capital, 9%. What's to see here? But if the Wall Street Journal is right, and Corweave is actually
[01:15] selling the debt at a discount at, let's say, $85 is what they're selling it for, they could still legally disclose that their cost of capital is 9%.
[01:27] But their last fundraising round actually cost them $9 into $85 as a yield, which if you divide it, works out to almost 10.6%,
[01:41] which is substantially higher than they let on in their financial statements. So here's another example where legally you could say you're paying this much in debt, But the reality is you're paying this much because you were able to raise significantly less upfront money.