This will have a Saylor connection (#1600946), bear with me...

So then Mr. Levine goes through three hypothetical scenarios that transfer ownership/economic rights between a company and an outside investor:

1. Sell 10% of a 10m company on Jan 1. When Dec 31, company is worth 100m, that outside investor turned 1m into 10m, and the company's original owners have equity worth 90m. The company didn't change, but the distribution of owners did (100% of 10m vs 90% of 100m). This does not hit the company's income statement, obviously.
2. Company promises to deliver 10% of stocks to outside investor on Dec 31, against 1m fronted right now. It's worth 10m on Jan 1 and 100m on Dec 31. It's in some sense a loan... but

For most of the year, the company didn’t have that outside shareholder; instead what it had was, effectively, a bet against its stock. Still, this is basically the same as the first scenario; it’s just a delayed issuance of stock. [...] It’s not paying the investor $10 million in cash; it’s just giving the investor the agreed-upon amount of stock.

3. Company worth 10m on Jan 1, gets 1m today against a promise of cash-settled 10% of company value at the end of the year:

Dec. 31, the company is worth $100 million, and it pays the investor 10% of that, $10 million, in cash. The investor has made a $9 million profit. Has the company made a $9 million loss? Definitely, right? That’s a real cash payment; the company just made a cash-settled bet against its stock, and lost. Pretty clearly this reduces its net income.

Companies do raise money by promising to issue stock in the future: They sell convertible bonds or warrants, giving the buyer the option to get stock in the future. If a company sells a $1,000 bond that converts into 50 shares of stock when the stock is at $20, and then the stock goes to $50, then the bond is worth $2,500. The bondholder has made $1,500. Has the company lost $1,500? Does it have to reduce its net income by $1,500?

Kind of.

...and now, for Anthropic's gigantic 80bn net loss for H1:

.... so, what's up with STRC and MSTR and Saylor? When company goes up in value and fuels itself, perpetual motion machine style, by a) constant inflows via repeated promises to outside investor, and b) when that doesn't work -- which is quite often -- dilute common shareholders by ~1-2% per week... do you end up with net losses in the company?!

Of course not accounting wise, but what company management is doing is repeatedly hurling over (new) equity to outside investors for an ever-appreciating company.

Not sure that's a great idea, browskie.

https://newsletterhunt.com/emails/533488

also, the onion and Kalshi story in here is fantastic!