SoftBank reduced its margin loan backed by OpenAI shares from $10 billion to $6 billion. The reason was the lenders' reluctance to accept the shares as collateral at the primary valuation of $852 billion. This type of financing, common in publicly traded companies, is unusual in private firms like OpenAI, where the asset's value depends on the bank's judgment.
Valuation technology clashes with private stock liquidity 💼
Margin loans require liquid collateral with a clear market price. In private companies like OpenAI, shares are not publicly traded, forcing banks to estimate their value based on funding rounds or secondary agreements. SoftBank offered the shares at the price of the last round, $852 billion, but lenders applied discounts due to lack of liquidity. The gap between theoretical and real valuation forced the cut.
Lenders prefer cash over dreaming about the future of AI 💸
The banks looked at OpenAI shares and thought: nice dream, but better pay in cash. It turns out that accepting a private company worth $852 billion on paper as collateral is like asking for a loan with a Picasso painting: nice, but hard to sell quickly if payment fails. SoftBank learned that the future of artificial intelligence is not as convincing as cold hard cash.