Are they really "trying to hide" this debt? I think it's pretty common knowledge that a lot of these companies are using debt/bonds for funding. The debt not showing up where the author wants is a reporting formality not an attempt to hide it.
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.
Generally speaking after commencement the former will become both liabilities (for a smaller amount than the number they listed due to discounting) and an asset (representing the asset of the right to occupy the lease)
The latter will generally become some sort of asset
I have no idea what the people going on about subsidiaries could even possibly be referring to as it relates to this article, this is just lease accounting
My concern is that the subprime mortgages were not perceptible to even savvy fund managers, and the same thing could happen again; and also, even if that insidious risk-poisoning of institutional funds does not occur, them a collapsing bubble still fucks us all into recession.
In the run-up to 2008 a big factor in the bubble forming was that poor quality loans were packaged in a way to hide the risk in those investments. I'm not expert enough in finance to know if it's the case now, but we do know that clever accounting to hide debt can lead to the incorrect valuation of assets, potentially leading to financial ruin.
An analogy that comes to mind is when companies used to book future sales in the present. They got in trouble for this and is now forbidden. I recall reading that one deal had terms that transferred assets if certain conditions were not met. If terms-based debt should be booked now, then terms-based assets should as well. This stuff makes my head hurt.
Either way, as long as it's not hidden (and it's not for the public companies), then it's fine.
Who is stuck with that bill and what is their ultimately their primary source of financing?
It's sort of like saying "aluminium smelter is hiding massive off balance sheet debt by agreeing a long term energy price with a power station" - when in reality it just agreed a forward price to de-risk it's production.
Couldn't you characterize Enron that way? The liabilities are there, you "just" have to look at Raptor II or whatever!
And yet... the companies do this because it works. If they held this debt on balance sheet, the sensible assumption is that their stock values would take a rather substantial hit, and they could face other sorts of scrutiny. It works like pull-in sales works. It works like channel stuffing works. It works even when everybody knows that's what's happening. It works even when everybody knows that everybody knows that's what's happening.
There's something broken here. In an era where AIs move millions upon millions of dollars around because of some blip of a headline somewhere and every AI improvement of any kind is immediately scrutinized for its ability to be used by the financial system, it is completely incredible that the system doesn't know and react to these things. I'm not sure what's broken. My first best guess would be the increasingly mindless investment via index funds in pensions and the slow-but-ever-increasing ability of financial engineering to abuse that mindless investment, but I call that a "guess" for a reason. Possibly there's still a lot of really stupid AIs hooked up to the stock market that just look at the most basic of numbers and are easily fooled by this? But who is running such a precise combination of "huge" and "stupid" on the market? I dunno. Something's weird here.
I think there is some sort of collective collusion. Like a school of fish moving. If there is an external stimuli the price can rise or fall eventhough it doesn't make sense from a 10y dividend perspective.
Until it doesn't. I'm not only old enough to remember Enron, I'm old enough to remember the S&Ls.
And even if you look at the debt, even companies like meta make 200 billion revenue in 2025 alone.
Isn't it good that these companies with these massive massive deep pockets invest?