>However, Anthropic’s disclosure to KBRA excluded several important financial metrics, including free cash flow and earnings before interest, taxes, depreciation and amortisation. Credit rating analysts had to come up with their own estimates based on assumptions, the documents show.
>Given the limited information, KBRA produced a “risk score” to assess Anthropic’s creditworthiness rather than the traditional full financial models.
This and the fact they went to a small ratings agency does not inspire confidence in the rating.
First SpaceX, now Anthropic. I wonder what happened the last time the big rating agencies gave massive amounts of sketchy debt investment-grade ratings to avoid alienating their customers?
> Bankers for Anthropic and rival OpenAI have lobbied the largest rating agencies to grant the AI labs investment-grade ratings once they go public. Investors expect the initial public offering this year to hit a valuation of more than $2tn.
Let’s be clear about what this means: it gives them access to the corporate bond market. What they’re lobbying for is that pension funds, life insurance, etc., can take exposure to these companies. Suddenly the everyman, your mom and dad, have significant exposure to these companies and their circular financing deals without even knowing it. This is disgusting.
What a lot of people fail to realize is that the rules around IPOs changed since the dot com bubble. Previously, employees counted as shareholders and companies above a certain threshold of shareholders were required to IPO. This is why companies like Microsoft, Amazon, etc., had the majority of their growth while being publicly traded. This allowed the everyman with a brokerage account to participate in these gains.
These rules were essentially removed by Obama in 2012 through the JOBS act. What this means is that companies can stay private for a majority of their growth phase, which is why we’re seeing IPOs being floated with $2T dollar amounts on them. They’ve privatized the gains, and they only IPO once they want to cash out.
So let’s understand clearly what’s about to happen: early VC investors in oai/ant are going to make billions selling dogshit to your parents pension funds, your parents pension funds are run by idiots who will gleefully take the AI exposure and are legally allowed to take that AI exposure because the AI companies lobbied the credit rating agencies to allow it, and when the bills come next year and these companies are completely unable to meet their liabilities, your parents have to postpone their retirements or come back out of retirement to make ends meet.
It’s truly evil. I hope the employees at these companies with dollar signs in their eyes awaiting their multimillion dollar payoff understand the system that they’re participating in and how evil it is.
Point blank: 2008 was about manipulation of the credit rating agencies. This bubble will also be about manipulation of the credit rating agencies. Absolutely deplorable.
And no, just to nip this in the bud, AI isn’t a fad. It’s the most transformative technology of our lifetimes. It’s going to change everything. But that doesn’t have anything to do with chaos in financial markets or malinvestment during the gold rush. It has to do with whether these companies have any kind of moat and whether the billions being poured into current generation chips are going to depreciate over the timeframes that investors think they will.
> Let’s be clear about what this means: it gives them access to the corporate bond market. What they’re lobbying for is that pension funds, life insurance, etc., can take exposure to these companies. Suddenly the everyman, your mom and dad, have significant exposure to these companies and their circular financing deals without even knowing it. This is disgusting.
What's the problem? Fund managers—who are in a position to understand the risks more than your everyday investor—can decide if they want buy these bonds or not, just like any other public corporate bond.
I don’t like that they’re fleecing the corporate bond market after privatizing the majority of their upside. Yes, I wanted them to issue their junk bonds even earlier.
From the article:
>However, Anthropic’s disclosure to KBRA excluded several important financial metrics, including free cash flow and earnings before interest, taxes, depreciation and amortisation. Credit rating analysts had to come up with their own estimates based on assumptions, the documents show.
>Given the limited information, KBRA produced a “risk score” to assess Anthropic’s creditworthiness rather than the traditional full financial models.
This and the fact they went to a small ratings agency does not inspire confidence in the rating.
This is not particularly newsworthy. Kroll is not one of the main ratings agencies, and certainly not the one bond purchasers use.
First SpaceX, now Anthropic. I wonder what happened the last time the big rating agencies gave massive amounts of sketchy debt investment-grade ratings to avoid alienating their customers?
Junk ratings are not investment grade. They’re rating this debt as at least a little bit sketchy.
It's not a big ratings agency, and it's not investment grade.
Non-paywall link: <https://finance.yahoo.com/technology/ai/articles/anthropic-s...>
Thanks, very helpful. I was shocked to read they are securing $35B for chips and then to read it's buying chips from alphabet/Broadcom.
It's a nice thought but so far none of the hyperscalers seem to give a single fuck about how much the cash costs to borrow.
> Bankers for Anthropic and rival OpenAI have lobbied the largest rating agencies to grant the AI labs investment-grade ratings once they go public. Investors expect the initial public offering this year to hit a valuation of more than $2tn.
Let’s be clear about what this means: it gives them access to the corporate bond market. What they’re lobbying for is that pension funds, life insurance, etc., can take exposure to these companies. Suddenly the everyman, your mom and dad, have significant exposure to these companies and their circular financing deals without even knowing it. This is disgusting.
What a lot of people fail to realize is that the rules around IPOs changed since the dot com bubble. Previously, employees counted as shareholders and companies above a certain threshold of shareholders were required to IPO. This is why companies like Microsoft, Amazon, etc., had the majority of their growth while being publicly traded. This allowed the everyman with a brokerage account to participate in these gains.
These rules were essentially removed by Obama in 2012 through the JOBS act. What this means is that companies can stay private for a majority of their growth phase, which is why we’re seeing IPOs being floated with $2T dollar amounts on them. They’ve privatized the gains, and they only IPO once they want to cash out.
So let’s understand clearly what’s about to happen: early VC investors in oai/ant are going to make billions selling dogshit to your parents pension funds, your parents pension funds are run by idiots who will gleefully take the AI exposure and are legally allowed to take that AI exposure because the AI companies lobbied the credit rating agencies to allow it, and when the bills come next year and these companies are completely unable to meet their liabilities, your parents have to postpone their retirements or come back out of retirement to make ends meet.
It’s truly evil. I hope the employees at these companies with dollar signs in their eyes awaiting their multimillion dollar payoff understand the system that they’re participating in and how evil it is.
Point blank: 2008 was about manipulation of the credit rating agencies. This bubble will also be about manipulation of the credit rating agencies. Absolutely deplorable.
And no, just to nip this in the bud, AI isn’t a fad. It’s the most transformative technology of our lifetimes. It’s going to change everything. But that doesn’t have anything to do with chaos in financial markets or malinvestment during the gold rush. It has to do with whether these companies have any kind of moat and whether the billions being poured into current generation chips are going to depreciate over the timeframes that investors think they will.
> Let’s be clear about what this means: it gives them access to the corporate bond market. What they’re lobbying for is that pension funds, life insurance, etc., can take exposure to these companies. Suddenly the everyman, your mom and dad, have significant exposure to these companies and their circular financing deals without even knowing it. This is disgusting.
What's the problem? Fund managers—who are in a position to understand the risks more than your everyday investor—can decide if they want buy these bonds or not, just like any other public corporate bond.
I don't understand your position.
First you say you don't like that they're accessing the corporate bond market, which is something all public companies can do.
Then you say they should've IPO'd earlier when they were even earlier stage and riskier .. which would allow them to issue bonds even earlier?
What is your position? Or are you complaining for the sake of complaining?
I don’t like that they’re fleecing the corporate bond market after privatizing the majority of their upside. Yes, I wanted them to issue their junk bonds even earlier.
[delayed]