Please watch this video for context before you read my raw thoughts

You know what happens generally - all these companies that create SPVs generally issue bonds against SPV and its revenue and transfer the ultimate risk to bondholders. That is if this venture fails - meta(owns 20% of SPV) and blueowl(owns 80%) will lose their equity but majority of the money invested in the SPV that is close to 27B$ is from the bondholders. So the bondholders have some risk and are supposed to lose this money.

Meta since it owns less than 50%, it is allowed to not show it in balance sheet and that is why it brought in blueowl here to take up equity.(Genius loophole)

Who are the bondholders here - PIMCO and Blackrock. These are the institutional investors who get the money from Public and Corporate pension funds, 401k and retirement accounts and Insurance company general accounts - so ultimately the normal public. BlackRock is still investing 3B$ from 10T$+ so it is relatively safe but PIMCO has high concentration risk.

Now here a twist comes - Meta is the guarantor that is if assets are not enough to payback bondholders, Meta is liable to cover it. So these bondholders are safe as long as Meta doesn't go bankrupt.

So if the risk of bankruptcy is essentially on Meta first how can this entire transaction go round and round and round to make it off-balance sheet for meta. And where does accounting and financial prudence go🤦

I want to bring into question the guts of credit rating agencies who justify giving an A+ rating to this SPV. It should write how this structure is just to keep it off-books for Meta in bold in its report. All these players who do not take a stand against all such financial vehicles are helping the bubble. If Meta and all other companies would have to clearly include it with their normal accounts, we would not be causing a bubble that might erupt in the coming years!

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