[skohan]

If it didn't matter, why would they bother jumping through hoops to keep the debt off their balance sheet?

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.

[rmah]

They're not jumping through any hoops, I think they're simply complying with reporting requirements. It's not on their balance sheet because being recorded as strait debt would itself be misleading. My understanding is that these sort of off-balance sheet "debt" is mostly in the form of deal terms that may or may not be expressed at some point in the future.

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.

[HDThoreaun]

Because this isnt actaully debt. Almost all of it is agreements to pay for completed datacenters from developers. Its just a way to offload operational risk when constructing datacenters. If the construction somehow fails theyre not stuck with the bill.

[oblio]

> If the construction somehow fails theyre not stuck with the bill.

Who is stuck with that bill and what is their ultimately their primary source of financing?

[HDThoreaun]

Well theyre locking in the price now. They go to developers and offer to sign exclusive leases on a datacenter they designed that isnt built yet. This strategy offloads risk to the developer because theyre the ones who need to ensure the dc gets built on time and budget in order to get paid. Yes, the biggest costs here is the hardware, but theres still tons of other issues to figure out before you get to hardware install and these conditional leases make it so they dont need to worry about that stuff.

[psd1]

According to ciphertalk, VCs charging high premiums: https://news.ycombinator.com/item?id=48917135

[entech]

Nobody is hiding the debt. It is just an investment that people are not used to for this type of business.

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.