Meta has plenty of money, why do they need private equity to fund this?
But tech companies horde cash because they don't have anywhere they see as a good investment.
You'd think investing in their own data centers would get a better return than cash.
Kind of makes you wonder why everyone is so eager to fund these projects for them.
Practically speaking, they also need to build data centers, and real estate has more pedestrian (returns and) valuations, even when it houses fantastical uber tech.
Kudos for being very succinct. I believe the youths would have just replied: "this." :~>
Is Meta so unsure about this investment, that they decided to spread the risk and profit to other parties, even though they could fund it themselves?
(AI bubble death knell ?)
In terms of corporate capital structure, shareholder returns are usually maximized by taking on at least some debt (leverage). The precise optimal proportion of debt depends on several factors, particularly credit rating.
You'll be paying a higher rate of interest on your loan than you're receiving on your cash.
You'd be better off taking the $1m directly out of your cash pile.
When you borrow $1M against $100M in cash or assets its generally considered a very low risk loan, meaning you'll likely get good terms and comparatively low rates.