In October, OpenAI secured a 4 billion dollar revolving credit facility from J.P. Morgan and several other banks. I was surprised when I heard this because OpenAI is a young company with no earnings. Shouldn't all their capital come from investors? Let's run some numbers.
From first principles
Let's do an Expected Value (EV) calculation, first from the perspective of an investor and then from the perspective of a lender. We'll pick some arbitrary parameters first, then refine.
Putting our investor hat on, the possible returns for investing $1,000 into OpenAI look like this:
Cost: $1,000
Case 1 (90%): OpenAI goes bankrupt. Return: $0
Case 2 (9%): OpenAI becomes a big successful company and goes 10x. Return: $10,000
Case 3 (1%): OpenAI becomes the big new thing and goes 100x. Return: $100,000
Our expected value is:
\[\begin{align} EV &= -1000 + 0.9 \times 0 + 0.09 \times 10000 + 0.01 \times 100000\\ EV &= -1000 + 0 + 900 + 1000\\ EV &= 900 \end{align}\]
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