alt Hacker News> For the right investor base, $10B in annual losses at OpenAI could be worth $2-3B in tax shields (depending on their bracket and how the structure works). That completely changes the return calculation
I know nothing about finances at this level, so asking like a complete newbie: doesn't that just mean that instead of risking $10B they're risking $7-8B? It is a cheaper bet for sure, but doesn't look to me like a game changer when the range of the bet's outcome goes from 0 to 1000% or more.
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The taxes on returning profits to investors via dividends are quite high. You’d be looking at the corporate tax rate (35%) + the dividend tax rates (between 15 and 35%). For any company which may need to raise equity finance later, this is an awful deal - but growing a cash balance doesn’t do the job either.
So MSFT is effectively getting 2x the equity by putting money into OpenAI, it also conveys some financial engineering capability as they can choose to invest more when profits are high to smooth out cash flow growth.
Your intuition is exactly correct. An investor with tax to offset can essentially access the same future upside at a discount
However, this discussion will be a perfect introduction to "finances at this level", where about 60% of the action is injecting more variables until you can fit a veneer of quantification onto any narrative.
That just doesn't sound right. This kind of thought process only works if you think you are guaranteed more than that the next year. It only works in crony capitalism where your friends in government put money in your pockets. It's where we are right now, but definitely not something that is sustainable or something to aspire to.
If that $7-8 billion is spent on Azure, then it's basically a way to invest in data center capacity while also getting a big piece of Open AI ownership at the same time.
Är the same time, MS revenues are looking real good, causing the stock price to go up. It's a win win win maybe win huge situation.
It all depends on the actual numbers. Consider this simplified example: If you are offered a deal that requires you to lay down 10 billion today and it has a 5% chance to pay out 150 billion tomorrow, your accountants will tell you not to take this deal because your expected return is -2.5 billion. But if you can offset 3 billion in cost to the tax payer, your expected return suddenly becomes $500 million, making it a good deal that you should take every time.