00:00This is not dissimilar to the Google story we had the other day.
00:05They were going to raise $85 billion, right?
00:08It's diluting the current shareholders, which is why we see the shares selling off today.
00:14Yes, well, the way I'd put it, Matt, is that the offering is similar in structure to the Google offering
00:19last week
00:19in the sense that it has the sale of common stock, the sale of a mandatory convertible preferred,
00:26which is an equity-like instrument that converts into equity in three years.
00:30And there's also a larger ATM, or at-the-market offering, where they'll dribble out the stock in the third
00:34quarter.
00:34And that's very similar to what Google did last week.
00:36The difference here is that this is a much, at $7 billion, this is a large portion of Supermicro's market
00:43cap.
00:44So it's going to be around, you know, 30% dilutive.
00:47They've got all these orders coming in, so that good news sort of offsets the bad news of the dilution.
00:52But the stock's still down 18% today.
00:55Google raised $85 billion for a multi-trillion dollar company.
00:59So for them, it was about 2% of outstanding.
01:01So it's similar in structure, but the dilution is completely different.
01:05So Supermicro Computer, they make the servers, they make the racks that hold these GPU, TPU,
01:14or whatever chip processing units to power AI data centers, right?
01:19And they have orders for billions, tens of billions of dollars of those racks.
01:24Yeah, so the company's saying in recent weeks they've had orders for, believe it or not, $39 billion worth of
01:28these AI servers.
01:30And if you remember this company, it really sort of rode on the coattails of NVIDIA over recent years until
01:35it hit hard times in the last year or so.
01:37So now it's sort of getting back on a more even keel.
01:42But this obviously sets back the stock now.
01:43But yes, I mean, we're really seeing this sort of AI CapEx explosion really play out in a number of
01:50stocks and companies like this.
01:51And we're seeing that they really do need to raise money and equity because these companies really want to do
01:59this in a way that doesn't overly stretch their balance sheet.
02:03And, you know, it ensures that they can, you know, do this in a way which is more prudent, I
02:10guess, compared to, like, raising a whole bunch of debt, basically.
02:13Right.
02:13And in some cases they may not be able to raise this.
02:15Well, I mean, raising $7 billion and I guess shareholders only taking, what, a 10%, 15% hit isn't the
02:21worst that it could have been.
02:23Yeah.
02:23Well, I think it's a big hit for the company, but I think, you know, they were hoping that the
02:29news about the AI orders would sort of offset the bad news of the dilution.
02:33And it hasn't, it has to some extent, but not completely.
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