IREN Needs $2–3B in 12 Months, Not $8.8B Upfront
There is some confusion regarding when $IREN Ltd(IREN)$ needs capital to cover the costs of $Microsoft(MSFT)$ data center.
No, IREN doesn't have an "immense urgent challenge" of securing the estimated $8.8B it will cost ($3B construction +$5.8B GPUs)
Nobody pays for $8.8B project with a single check, money is paid in stages as milestones are met.
1) MSFT agreed on a $1.94B pre-payment, this is enough for 65% of the $3B construction costs.
2) The deal with $Dell Technologies Inc.(DELL)$ said that Iren pays for GPUs on delivery, not before. In practice, this means that Dell will issue Iren a 60-90 day invoice when equipment is delivered.
3) Dell already agreed for a $199M 24-month vendor financing for the first tranche of equipment. More tranches will come.
4) So IREN will need to pay $1.1B to finish the construction, probably in 6-12 months, not tomorrow.
5) Dell will issue more tranches of vendor financing for equipment, probably for $2-3B.
5) But, when GPUs are delivered, that triggers a payment from $MSFT, which Iren can use for any costs.
6) So Iren only needs to raise $1.1B in 6-12 months to finish construction.
Next, by the time all GPUs are online, Iren would have had to pay $5.8B, but
Dell will probably provide 2-3B, and Microsoft will pay $1.94B again when GPUs begin work.
That leaves $0.86-1.86B for remaining GPU financing.
So in the next 12 months, Iren needs to raise about $2-3B, not $8.8B imminently as some have implied.
That is quite a big difference.
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