alt Hacker NewsThis seems like the sort of thing that would be really fascinating to understand but so far your comments are very opaque.
Consider this an invitation to expound at great length on the subject, if you are in to that sort of thing.
This seems like the sort of thing that would be really fascinating to understand but so far your comments are very opaque.
Consider this an invitation to expound at great length on the subject, if you are in to that sort of thing.
Bonds are a weird product. As long as the issuer honors them (remains in business) they are a guaranteed return.
In this case CoreWeave has sold ~4billion in 5 year bonds at a 9% rate. If you buy one for 1000 bucks you will get 2x45$ payments a year for 5 years. Then at the end a 1000 cash payment.
For the sake of argument let's say you bought this earlier this year. You now have an asset worth 1000 dollars. If it is a good bond (A US treasury or Municipal Bond) you can borrow against it from lots of place - you have something worth 1000 dollars on your "books" (accounting). For the earliest sales (you) core weave has already made a 45 dollar payment.
You now have a 1000 dollar asset and 45 bucks in cash. IF you hold to maturity and keep all the money you get 1000 bucks back and 450 bucks in interest.
What happens if you want to sell it? Maybe rates went down a lot, so that 9 percent is huge, and the AI boom is going gang busters so that 9percent looks like a good deal. I offer you 1100 for the bond. You now have 1145 dollars in cash.
What happens if you need money, and rates are the same and CoreWeave looks the same? I will offer you 980 for it... You now have 1025 bucks in cash... and I get the rest of the payments (45$x9) and 1000 bucks back at the end. (This has tax implications).
What happens if you want to sell cause you need money AND, you think CoreWeave is gonna burn, or this "ai thing" is a bust. Well it's likely that I think that too. the bond is only ever going to pay 45X9 more payments but I want a higher rate. I say to you "I'll give you 800 for it" (a 15% rate), cause CoreWeave is fucked. You need the cash so you sell it for that much and have 845 bucks. Thats a loss of $155.
Let's say you bought a billion of those bonds, and expected to walk away 1.45 billion in 5 years - but you sold them all off today and LOST 155 million.
Someone owned a LOT of 9% Core Weave bonds and either found a BETTER investment -OR- they wanted out of CoreWeave and no one had the money or desire to own them. The bond buying market is announcing that "We don't want any more CoreWeave Debt".
There are a lot of problems with CoreWeave: those 5 year bonds it sold, well the contracts to support them (15 billion a year in revenue on 60 billion of debt) only run for 3 years. At current rental rates for long term commitment NVIDA hardware had a 3 year pay off term... But thats not power, the building, staff, the business was (is) marginal.
Who was selling the debt? Well my guess would be a chunk of it was JP Morgan (who set up the bonds to start with). Dumping it right after you announce your numbers (they were a minor miss) and lower your target for CoreWeave's stock would be an ideal time. But that is PURE speculation.