6 ms·
Meta has plenty of money, why do they need private equity to fund this?
by dom96 1y ago
Meta has plenty of money, why do they need private equity to fund this?
- consumer451 1y agoIsn't the first rule of business that you spend other people's money, whenever possible?
- onlyrealcuzzo 1y agoAnother #1 is to get a good return on your money. But tech companies horde cash because they don't have anywhere they see as a good investment. You'd think investing in their own data centers would get a better return than cash. Kind of makes you wonder why everyone is so eager to fund these projects for them.
- nextworddev 1y agoBecause that’s the only place with growth
- consumer451 1y agoSometimes the simplest point makes the most sense about a complex topic. Kudos for being very succinct. I believe the youths would have just replied: "this." :~>
- aorloff 1y agoTheoretically, tech companies valuations are based on the notion that the best place for them to invest money is internally, that their internal flywheel is the absolute highest return on capital. Practically speaking, they also need to build data centers, and real estate has more pedestrian (returns and) valuations, even when it houses fantastical uber tech.
- consumer451 1y agoGood points, but after processing other replies in this post, I would change the last sentence to: Is Meta so unsure about this investment, that they decided to spread the risk and profit to other parties, even though they could fund it themselves? (AI bubble death knell ?)
- grugagag 1y agoDump risk on others
- Ekaros 1y agoMake the numbers look better? There must be benefits of moving these numbers from column to some other column. Or even partially hiding them. Thus allowing stock to be priced higher based on some metric...
- halayli 1y agoif you have $100M and you need a $1M, you'd use your credit line and borrow $1M and pay it back from interests coming from $100M. it's not that different in corp.
- jstanley 1y agoThat doesn't make any sense. You'll be paying a higher rate of interest on your loan than you're receiving on your cash. You'd be better off taking the $1m directly out of your cash pile.
- deleted 1y ago[deleted]
- binarymax 1y agoNot necessarily. You can get an interest rate lower than your investment return rate.
- YokoZar 1y agoWhen interest rates were particularly low years ago, we saw a large number of companies issuing bonds and then using the money to just do stock buybacks.
- _heimdall 1y agoThat depends heavily on the terms of the loan you can secure and how you choose to invest the cash. When you borrow $1M against $100M in cash or assets its generally considered a very low risk loan, meaning you'll likely get good terms and comparatively low rates.
- halayli 1y agoYou need to consider secured line of credit vs unsecured and the interest rate is significantly different as one is backed by collateral and the other is not.
- SoftTalker 1y ago> structured in such a way as to keep the debt off of the Social Network's balance sheets
- nradov 1y agoThe article is poorly written. This deal is mostly debt financing with only a little bit of equity. In terms of corporate capital structure, shareholder returns are usually maximized by taking on at least some debt (leverage). The precise optimal proportion of debt depends on several factors, particularly credit rating.