I'm surprised they didn't go the debt route, trade finance could cover their customer orders. I know they are risk averse in case companies back out of orders, but bringing on more shareholders is its own form of risk.
Is something else going on here, are they locking in orders from AMD and other suppliers beyond their current order backlog?
Debt can bankrupt you, equity can’t. They’re concerned the meme companies will collapse, cancel their orders and then kill them. Then mr bezos will turn up and liquidate their assets.
Or… they could just take on equity investment at no risk.
This is a crazy take. If you can raise on good terms (or better) then it almost always beats debt. Debt can make it a lot harder to raise or take on more debt in the future.
They're profitable, they are going to get the best terms possible at this moment.
They can likely fund the purchase orders for 10% while they grow. Sounds cheaper than giving away a percent of all future profits. This is very common.
That would mean they would be growing slower. Being common is irrelevant.
Raising a Series D is an attempt to permanently increase the velocity of their enterprise. The change in the cap table is negligible if they succeed.
Raising debt right now would be a massive unforced error given they were able to shore up half a billion dollars in funding. If the funding well were dry then it'd be a different story, but that's not the case.
Can you imagine if they raised $445M of debt?
They said they are profitable aside from funding purchase orders, they don't need capital to fund growth. If they said they raised in order to grow faster and that they were not profitable then I would agree with you.
But if they're just scaling inventory, debt makes way more sense because they payoff is almost instant as soon as they fulfill the order to the customer. I agree the math is hazier when you're talking about massive capex, growing headcount, or other longer-horizon capital commitments. But if they just need to buy inputs to sell output to complete an order backlog, selling a portion of the company seems odd.
The people running the company are people who lived through the tech crash, and saw how quickly the entire economy around them can evaporate. At Sun, only slightly exaggerating, they went from flying high and controlling a market segment, to seeing all the demand evaporate and customers vanish, leaving the company holding the bag on just massive piles of inventory, basically in a day.
When you sell shovels, even slight downturns are massively exaggerated because the shovels can be resold, and if some of their customers go under, it's not just that demand that goes away, it's all the demand that can be satisfied by their customers purchasing second hand servers from the bankruptcies instead.
No-one can really say how long this bubble will last. Might pop tomorrow, might be a decade. But if Oxide funds inventory on debt, and the bubble pops, they go with it. Whereas if they fund on equity, and it pops, they will come out the other side just fine. The cost of this is that the old stockholders have a slightly lower upside.
blog mentions the use of debt facilities, there's a smart mix of both debt and equity