the starship convinced investors that escape velocity was nigh and money printed by global central banks flowed for visions of one billion devices with or without buying power connected to a network plus a few petrol pumps.
the promise was to make the business model net debt-free. think about the term for a moment. the business model borrows money, debt, reported on the balance sheet along with its cash which may or may not be a residue of the debt not reinvested. giving the bean counters the benefit of the doubt the net debt is the subtraction of the cash from the debt and that is the net debt. Three dollars in debt less two dollars in cash result in one dollar of net debt.
this is undeniably cute. the phrase net debt free means that the cash on the balance sheet is greater than the debt. the purchasing power if intended is the business model could return monies borrowed to the 100 lenders and 14 export credit agencies found on page 108 of the annual report and have cash left over, selling equity claims on future earnings from tethered digital devices, petrol pumps, and an infinite array of petrochemical byproducts to pay old loans.
the thing is cash on the balance sheet at any given moment is a snapshot of a continuing corporate journey to meet payroll, acquire inventory, and expend capital for future plans. the cash at any given moment has operating claims against it wagering that enough customers will appear to cover the costs plus gratuity for real estate on billionaires row.
were this a normal or even semi-normal global economy the value of a tax-free explorer, refiner, and distributor of petroleum and its by-products in a universe of one-seventh the world population with recurring revenue streams may be worth thirty times trailing earnings. the other edge of the sword is that when global aggregate demand is decimated by a singular historical event the only challenge to forecasts is the lower bound. not how many customers will show up but how few and whether they can pay.
the business model is an achievement with a digital cherry on top and as is the historical want for rare cherries global investors have paid for the privilege to share the risk of the ripening at a price and rate that harkens tulips three centuries ago and fifteen other similar journeys reputed to be new paradigms. it is always different until its not.
throw a dart and pick a measure. the market value of $150 billion which is the definition of the risk is thirty times greater than $5 billion in the annual reported earnings before any adjustment for an economic black hole that has yet to course through income statements.
pictures help
Comments