| ▲ | dotBen 4 days ago |
| It's a very capital intensive operation given the amount of vehicles that need to be carried on the balance sheet. There are many reasons why a conglomerate like Alphabet doesn't want to hold all of that directly on the balance sheet, which is why Waymo is run as a subsidiary with its own sources of capital. When I was at Uber 10 plus years ago and we were ideating autonomous vehicles. The general consensus was that we would run the technology platform and private equity would own fleets of cars built and operated to our specification. Waymo has concluded either we are too early in the journey to decouple the tight vertical integration or they want to go very big and own all of the capital expenditure for what will presumably be a global rollout ultimately. For anyone like me with a finance and technology crossover interest I actually think this is as interesting, maybe more interesting, than the private equity play around data centers at the moment because all of that is constrained against chip delivery and power constraints. |
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| ▲ | alooPotato 4 days ago | parent | next [-] |
| > There are many reasons why a conglomerate like Alphabet doesn't want to hold all of that directly on the balance sheet Can you tell us those reasons? I think this is basically _the_ question. |
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| ▲ | UebVar 3 days ago | parent | next [-] | | "Tech" was incredible light on CapExp compared with everything else (until AI hit, that is). That is what allowed its explosive growth. On the one hand alphabet is not used to that. On the other hand it is turning into a more normal business with more CapExp, and like other more "normal" business it uses more external investment. As a general rule of thumb: The more capex, the more leverage; for example commodity extraction, infrastructure or power generation are very capex heavy, and heavily leveraged. | | | |
| ▲ | BoorishBears 3 days ago | parent | prev [-] | | I disagree with their reasoning and would say it's more for strategic benefits. Giving firms that they get along well with (like Sequoia) allocation feels like a mix between a favor and possibly a way to signal that the valuation has some external buy-in too. |
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| ▲ | loeg 4 days ago | parent | prev | next [-] |
| > The general consensus was that we would run the technology platform and private equity would own fleets of cars built and operated to our specification. Private equity, or private capital (debt investors)? Although I guess PC was less of a thing 10 years ago. |
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| ▲ | kolbe 4 days ago | parent | prev [-] |
| Alphabet is providing $13bn of the $16bn raise. What are you talking about? Do you really think that $3bn matters in the slightest? |
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| ▲ | dotBen 4 days ago | parent | next [-] | | What I'm talking about is that is still considered an external capital raise for the purpose of the markets and where those assets sit on the balance sheet. Also, keep in mind the Alphabet doesn't fully own Waymo. I don't know the percentage ownership of hand, but that also feels like it's probably a prorated investment based on ownership so Alphabet doesn't reduce its voting control. That's what I'm talking about. | |
| ▲ | infecto 4 days ago | parent | prev | next [-] | | Yes and what matters the most is what Waymo has been signaling for years. They don’t want the capex (owning and running the physical cars). I don’t know the intent of this raise but you have to realize companies may have a good asset but they don’t want to own it 100% for a multitude of reasons. Some of them could be as simple as wanting to get other investors involved and comfortable with the asset to maybe take on larger roles in future rounds. Or in this case potentially running the car part of the business. | | |
| ▲ | bryanlarsen 4 days ago | parent [-] | | By investing $13B of the $16B they're signalling they do want the capex, at least for now. | | |
| ▲ | infecto 4 days ago | parent [-] | | If they truly wanted the capex, this would not be a mixed round
A fully internal recap would have been simpler. The presence of outside capital, even minority, is consistent with a gradual transition toward shared ownership, asset light structures, or operator partners. They have made many comments over the years about this too. | | |
| ▲ | kolbe 3 days ago | parent [-] | | What gradual transition? Alphabet's ownership percentage is unchanged. | | |
| ▲ | infecto 3 days ago | parent [-] | | Notice I left a list of potential reasons. Not that ownership has changed. Just pointing out for folks like yourself that Google has made commentary about this exploring the idea of partnering with companies that operate the physical fleet. $3bn even if chump change for you is still a larger placement and has some level of signaling indicating the want to get other folks involved at some level. | | |
| ▲ | kolbe 3 days ago | parent [-] | | I didn't ask for potential reasons. You're talking about the "reasons" for a "gradual transition," and I am telling you that this investment isn't transitioning anything. Everyone is keeping their equal share of the company. So, I don't understand why you are giving reasons for something that isn't currently happening. | | |
| ▲ | infecto 3 days ago | parent [-] | | I think the words are going over your head sorry. I will try one more time but realize now it might be too much especially see some of your dead comments here. I am not claiming a transition is happening in this round, so asking for evidence of one misses the point. Transition here means enabling future shifts in who owns and operates the capex, not changing the cap table today. If Alphabet wanted permanent full-stack ownership, an entirely internal recap would have been cleaner. Bringing in outside capital, even minority, is about signaling and optionality, not dilution. | | |
| ▲ | kolbe 3 days ago | parent [-] | | I understand everything you have said. The D-K of you WSB transplants is wildly frustrating. If you'll notice, all I am doing is asking the brigade of snarky know-nothings to stop talking. I'm not pretentiously claiming to know, unlike all of you. You clearly aren't in any position to understand the internal working of Google, and it's unfortunate that HN used to be a place where a question like the original one would have been answered by a person who does, but is now flooded with people like you. I will gladly take the downvotes if they're from a bunch of garage band stock pickers. | | |
| ▲ | infecto 3 days ago | parent [-] | | Go take a breath and stop digging a hole. Nobody is being rude to you but you are highly inflammatory and honestly a real lowering of quality. Take a bit of your medicine and step away. I am sorry you feel the need to be so rude back to everyone. You are not “just asking questions.” You are dismissing any analysis that is not insider gossip as illegitimate, which is a convenient way to avoid engaging with the substance. No one claimed NDA level insight. We are talking about incentives, capital structure, and signaling, which is literally what outsiders analyze. If only Googlers are allowed to reason about Google, then HN has no purpose beyond rumor laundering. | | |
| ▲ | kolbe 3 days ago | parent [-] | | > I think the words are going over your head sorry. (You) > Nobody is being rude to you (Also you) I guess things are only rude if they're said to you, and not by you? Seems logically consistent with all your other takes. | | |
| ▲ | infecto 3 days ago | parent [-] | | I definitely modulated my tone to match yours and some of your killed comments. Sorry you don’t like what you see. Happy to have a discussion but not be told I am someone from Reddit. Low effort and low class. You are consistently being rude and you just need to reflect on some of your comments. Your right my comment back to you was definitely not nice but look at some of your killed comments. Ick. | | |
| ▲ | kolbe 2 days ago | parent [-] | | Sure thing boss. What other advice stemming from your vast experience, wealth, and psychological heath do you have for me? I'd love to improve my image to you... the "ick" police. | | |
| ▲ | infecto 2 days ago | parent [-] | | What are we arguing about here? My point was $3bn is minority to the total investment but it does signal some intent. It’s also no chump change. Sorry no advice for you but relax and step back! |
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| ▲ | spyckie2 4 days ago | parent | prev | next [-] | | This is why you are not the finance guy. My finance people care about the cents, a ROI of 7% is average but at 8.5% and now you are a world class asset of that inventory type. That’s sometimes the difference of a few hundred k out of 20m but they would not take the deal if it is slightly over due to their risk appetite. The 3b external either matters a ton to fit their risk models OR they are doing a favor to an outside party. Probably a bit of both. | | |
| ▲ | dotBen 4 days ago | parent [-] | | Well, given that it is an equity sale, split still feels like it is the prorated amount so that alphabet continues to own its percentage - not more not less. Obviously you're entitled to your view, but I don't think it's that kind of finance model right now - it's far too speculative and the upside too unknown to be adjusting for small amounts on risk models. |
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| ▲ | throwmeaway820 4 days ago | parent | prev [-] | | three billion here, three billion there, pretty soon it begins to add up to real money |
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