I think the point is that it’s not showing up on the standard financial filings. If you were to pull the annual reports for these companies, you wouldn’t see it. That doesn’t mean it’s impossible to find it. Obviously, it is otherwise the article wouldn’t have been written. But you’re going to have to go the extra mile. To be clear, none of this is illegal. It’s just covered in the advanced CFO accounting class.

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Anon1096 4 hours ago | parent | next [-]

It's not hidden at all. Financial blogs very accessible to laymen like Matt Levine's Money Stuff have talked about this structure months ago. If you are an investor and surprised by this news you weren't sufficiently prepared and shouldn't have been investing in the first place.

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aftbit 4 hours ago | parent [-]

What's the purpose of keeping it off the balance sheet if not to hide it?

	▲	drob518 an hour ago \| parent [-]
		A legitimate reason to do this is so that you can sell it all off or restructure it later without it being intertwined with your main books. So, for instance, it you’re an AI company, your main business is developing models and selling inference, but you need data centers to do that. You could buy those data centers yourself, or you could create a data center subsidiary that would take on debt and build your data centers and then rent them back to you. In the future, if you decide you don’t need that capability any longer, you just sell the subsidiary and you don’t have to tease apart the P&L and personnel to do it. It’s clean and separate because it was structured that way up front. Now, that’s not to say that there aren’t other benefits of having a separate balance sheet related to moving numbers around. But it doesn’t have to be nefarious.

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dmitriy_ko 4 hours ago | parent | prev [-]

Take-or-pay contracts appear as "contractual commitments" in 10-K. They are not hidden. That's the way they are reported in all industries where take-or-pay contracts exist. There's nothing nefarious about it.

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drob518 an hour ago | parent [-]

Yes, the contractual obligation shows up, but not the debt the subsidiaries took on. You have to follow the entity structure and look at their books for that piece. And it’ll show up as a different accounting category, “services rendered,” for instance, not as debt repayments.

	▲	dmitriy_ko an hour ago \| parent [-]
		If it's fully-owned subsidiary then debt would appear on parent-company balance sheet. It doesn't show up if it's an independent company, e.g. CoreWeave.