And to be clear, that's a 384 bit key, so the key was just 381 zeroes in a row, then a 1, then two more zeroes.
Or, with using regular decimal numbers, imagine a combination lock where the code is 115 digits long, and the first 114 are just zero, with a 4 at the end.
Repaying debt is cash cost. But this is convertible debt that could be converted to stock, in which case the holders of those newly converted shares don't get paid cash from the company, but instead own a chunk of the company worth more than that cash. So the conversion itself would alleviate the cash demands of the company, while also diluting the ownership stakes of any preexisting owner. That's what that paragraph means.
Companies issue convertible bonds usually because they can get better interest rates on it, in the event that they need to repay it. Or they're happy to deal with diluting their shares if the company becomes so valuable, because that means they've gotten a lot richer and just have to share their newfound riches with the lender.
That's the tradeoff, of course. If a company liquidates, it pays its debts first, then its preferred stockholders, then its common stockholders. But each step down the line gives a greater upside in exchange for less certainty in getting paid at all. Bondholders get paid at higher priority, but have the exact amount they get paid defined by a specific mathematical formula. So they won't get any additional benefit from the company becoming super valuable. Or they can get in the back of the line to see what unlimited upside they have from the company's value going up a lot.
Also, Anthropic's bonds aren't exactly low interest. They're right there at the edge between junk bond and investment grade.
Usually companies will publish an "earnings before interest, taxes, depreciation, and amortization" or EBITDA as a way to show whether their core business is actually profitable (even if shareholders aren't the ones to get the benefit of that business's operating profit). But that's not a standardized metric, and Generally Accepted Accounting Practices (GAAP) won't define earnings in that way.
The big problem is that the more a company has to deal with high cost of borrowing and huge capital expenditures, the more disconnected EBITDA is from actual GAAP earnings. I can build a hotel for a billion dollars and rent out a bunch of rooms, while each room transaction brings in way more money than it costs for me to have a guy at the front desk give them a key and housekeeping to clean their room, I need to actually make a lot more in order to cover the cost of all the furniture I put in the room, the construction costs on the building, and the interest payments to the bank that financed the whole thing. And if the furniture and the building won't actually last long enough to where I made all my money back before I have to reinvest a bunch of money into renovations and new furniture, then I don't have a profitable business. Or if it can be profitable on those numbers but I can't cover the interest payments to the bank, then the bank will eventually take it over and I'll lose the business entirely, so owning stock in that company isn't worth all that much.
So if they're saying they're barely profitable when you take out the very expensive costs of training new models, entering big expensive deals with data center companies to build out infrastructure, the stock they keep issuing to employees and partners, etc., that might keep things going a bit longer, but it's still not actually a path to true GAAP profitability.
This right here is how all of this will come crashing down
No, this is pretty normal, and more importantly, doesn't actually cost the company cash. They gave lenders bonds that can be converted to stock, so this loss on their books is pure paper loss, the same way wealth in owning stock in this money losing company is pure paper wealth.
These numbers are just illustration for simplicity, but imagine a company borrowing $20 billion and telling the lender that you'll either pay back the $20 billion plus interest, or they can opt to convert it into stock worth 10% of the company. When the company is worth $100 billion, the bondholders won't convert to stock. But if the value of the company shoots up on paper to where that same stock would be worth $100 billion, the lenders would rather take the stock than the cash repayment. And because it's worth $80 billion more, the company will have to record that on the books as replacing $20 billion in bonds for $100 billion in stock, and an $80 billion loss compared to their last statement.
But look at the underlying financial cash flow. When that happens, the company actually takes $20 billion in debt off their books. They don't have to repay that loan anymore. So it improves their cash flow position at exactly the same time that they're booking a loss.
The whole thing will come crashing down for totally different reasons, relating to operational cash flow, not the actual accounting shenanigans where one kind of paper number gets converted to another kind of paper number.
"we lose money on every sale but we make it up in volume!"
Could be any number of things:
Does it?
Reuters is reporting that Anthropic's Investor Day event a few days ago, where they showed their audited Q3 financials to investors, caused institutional investors to shift their sentiment and that they are being pushed to lower their IPO valuation target down from $2 trillion to $1.5 trillion.
Coreweave is down almost 20% this week. Nebius is down more than 15%.
Investor sentiment is shakier than it was a month ago. And for hype-fueled valuations, investor sentiment is a two-way street.
Plus their key founders/executives already left the company to go work for Google in 2024, in an acquihire where Google licenses the technology, hires the key personnel, and leaves the company a shell of its former self.
I wouldn't assume too much from this company, because it's not actually reflective of the broader trends in the industry.
What passkeys can't overcome is people dismissing the popups asking if they want to switch to passkeys or create them.
I think it'd actually be pretty easy. Just ask:
Trust this device, with biometrics?
Most people will say yes on their Apple/Samsung/Google devices.
It's been like 25 years since the security world basically moved on from assuming that users could be trusted to act securely. We gotta design processes and protocols that keep things secure even with people who have bad habits.
I can secure my email, but every email I send or receive touches at least one other mailbox I don't control, of some other user. Same with text messages, social media posts, etc. The digital world we use has a billion overlapping people, some with escalated privileges as employees or admins or mods or whatever. We can't make them perfect, so we should design systems that work well even with imperfect people.
That's why the current gold standard is a machine that marks a human-readable paper ballot, and then a drop box, and then a separate machine that reads and counts the ballots. At all times, the physical manifestation of people's votes sit in a guarded box, as piles of physical ballots that can be read and counted by humans, if necessary.
The initial ballot marking machine is good to have because it can prevent overvotes (marking more options than allowed, invalidating the ballot) and can make sure that voters intend their under votes (marking fewer options than the maximum allowed, such as when someone intentionally chooses not to vote on a particular item). The 2000 election taught America what can go wrong with ballots physically marked by the voter, even through a punch card machine. Even since then, there's been issues with what to do with stray marks or incomplete markings on optical scanned ballots (akin to Scantron tests when I was in school).
And once the ballots are marked, it's convenient to have reliable machines count the votes on the ballot. That way vote reporting is quick.
But the paper trail itself is the most important. It has to be a human readable ballot that the voter can visually verify before dropping it into the ballot box.