TL;DR
Coreweave, an AI company built on borrowed money and depreciating assets, is going public. This looks like an exit strategy for existing investors, leaving new investors to deal with the impending crash.
Story
Imagine a house of cards built on borrowed chips. That’s Coreweave, an AI company going public despite shaky foundations. They took out massive loans using NVIDIA GPUs as collateral—like pawning your graphics card for rent money. Problem is, these chips lose value fast, just like a new phone becomes old news. Coreweave’s collateral is now worth much less, and they almost defaulted on a $7.6 billion loan. Sounds familiar? Think 2008’s mortgage crisis, but with silicon instead of houses.
They claim it was an “administrative error,” but skeptics smell an Enron-style cover-up. Now they’re going public, hoping investors will buy the hype and ignore the red flags. At a $40 share price, their valuation is nearly $19 billion, meaning that massive loan represents almost half their worth. This IPO looks like an exit strategy for current shareholders, leaving new investors holding the bag.
‣ IPO (Initial Public Offering): When a private company sells shares to the public for the first time, often to raise capital. ‣ Collateral: An asset pledged as security for a loan. If the borrower defaults, the lender takes the collateral. ‣ Default: Failing to repay a loan. ‣ Market Cap (Market Capitalization): The total value of a company’s outstanding shares, calculated by multiplying share price by the number of shares.
Advice
Don’t fall for hype. Scrutinize a company’s financials before investing, especially when the collateral is as volatile as computer chips. Remember the 2008 mortgage crisis—history often repeats itself.