Talk about OpenAI’s intentions to attract investors’ funds, based on the capitalization of its business at $150 billion, has been going on for several weeks in a row. However, only now has Bloomberg learned that, along the way, the startup is preparing to raise $5 billion in borrowed funds in the form of revolving loans. Companies often take similar steps in preparation for an IPO.
Image source: OpenAI
As Bloomberg explains, raising $6.5 billion in capital for OpenAI is a separate task from accessing the line of credit. In the latter case, the company’s creditors will be banks, which in total will provide it with $5 billion. A revolving line of credit for corporations in such cases is analogous to a credit card for private bank clients. The company will not need to pay off its current debt in full in order to borrow money again.
Many companies in the technology sector have at one time used revolving loans to gain access to financial resources before going public. Meta✴ Platforms, Alibaba Group, Uber Technologies and DoorDash were noticed in this. As a rule, such borrowings allow the future issuer to achieve a certain level of trust in the banking environment, and by the time it enters the stock market, banks favorable to the issuer receive preferences for the purchase of its shares. The banks themselves often offer the borrower more favorable interest rates.