To The Moon

Friday's upcoming IPO of $CoreWeave, Inc.(CRWV)$ may be the biggest victim of Microsoft's order withdrawal:

1. Microsoft accounts for 62% of CoreWeave's revenue, and its shrinking order book is a direct hit to the company's revenue base.

2. The company's debt burden is currently as high as $8 billion (equivalent to 30% of the IPO valuation), and the pressure on debt servicing will further exacerbate cash flow constraints

3. The aggressive expansion model, which has consumed $7.1 billion in cash over the past two years, is unsustainable in the wake of divestment by large customers, and limited capex capacity could lead to stalled arithmetic infrastructure upgrades

According to Faber, what's the point of Coreweave's business model?Their capex and associated depreciation is unimaginably high, and in order to be a customer favorite, they have to buy the latest, greatest, and most expensive $NVIDIA(NVDA)$ chips with every update (many of which are annual).

CoreWeave's Gross Margin: CoreWeave's gross margin for FY2024 is about 74%, and due to the huge capital expenditures, the true gross margin could be even lower at about 30% if depreciation is properly factored in.

PS: The company's technical event of default:

• CoreWeave transferred loan funds to foreign entities in the U.K., Spain, and Sweden to expand in Western Europe, in violation of terms limiting collateral to the United States.

• CoreWeave misrepresented the number of eligible GPUs used as collateral and failed to notify lenders of the default within three business days.

As a result, CoreWeave had to request creditors such as $Blackstone Group LP(BX)$ to waive these defaults at no additional cost as the errors were administrative in nature.The parties amended the terms of the loan so that the borrower allowed CoreWeave to use assets located overseas as collateral in the future.