TeraWulf’s US$710m profit came from warrants it owes Google

01What TeraWulf owes Google

One of TeraWulf’s AI tenants at its Lake Mariner campus in New York is Fluidstack. Google agreed to backstop Fluidstack’s leases: if Fluidstack misses rent or becomes insolvent, Google either pays a termination fee or pays the rent due and takes over the lease. In return TeraWulf issued Google warrants to buy 73,580,000 of its shares at US$0.01 each, expiring in August 2030; 8,443,606 became exercisable in the quarter, when one of those leases began.² At a cent apiece, each warrant is worth almost exactly one share.

02Why a falling share price shows up as profit

TeraWulf carries the warrants as a liability, valued each quarter with a Black-Scholes model, and books the change in that value through its income statement.² When the shares fall, what it owes Google is worth less, and the drop counts as a gain. Its shares closed at US$24.70 on 30 June and US$14.80 on 30 September, 40% lower.⁷ The liability fell from US$1.82bn to US$1.09bn; the 10-Q puts the US$728.4m gain down to “the fluctuation in the Company’s stock price”.²³ It works the other way too: in January–June, when the shares rose, the same line cost US$972.0m, and over nine months it is a US$243.6m loss.²³⁴ No cash moves either way: the cash-flow statement adds the change back, and operations used US$178.9m of cash in the nine months.¹ The chief financial officer, Patrick Fleury, called it “the non cash fair value adjustment associated with the Google warrants” on the call.⁶

03The US$19bn Anthropic lease

In its release TeraWulf says it “executed a 20-year lease with Anthropic for approximately 401 MW of critical IT capacity, representing approximately $19 billion of contracted revenue over the initial term”, at its Justified Data Campus in Hawesville, Kentucky.¹ The leases were signed in July and had not begun on 30 September; capacity is due in phases from late 2027 to the second quarter of 2028, and Anthropic may extend for two five-year terms.²⁵ On 4 November Google agreed to backstop Anthropic’s obligations, from the day the last data hall begins until Anthropic holds investment-grade ratings for at least three months; if Google pays a termination fee, it may take an equity stake in the TeraWulf subsidiary that owns the campus.⁵ “TeraWulf is not granting Google any incremental upfront equity here,” Fleury said on the call, and the cost of Google’s support falls on the tenant.⁶

TeraWulf’s shares closed 12.8% higher at US$11.37 on 6 November, the day of the results.⁷ What to watch: the warrant line in the fourth quarter, set by the 31 December price; rent beginning at Lake Mariner’s CB-4 building this quarter; and the project debt for Justified.¹