The issue this file is about
The problemA company wins a large customer by giving that customer warrants over its own shares. Three separate pieces of accounting then start running at once, and they land in three different places. If the warrant fails the conditions for equity classification it becomes a liability, remeasured to fair value every reporting date, so every rise in the company's own value is charged to profit. The day-one cost of the warrant, where it was given to win a contract, is not an expense at all but a discount against the future revenue from that contract, released over the life of the deal. And because a fair-value movement on an equity-linked instrument is generally not deductible, the charge arrives with almost no tax relief. The reported loss can therefore be enormous, largely unrelated to cash, and driven by good news.
The caseSB Energy, Inc. filed a Form S-1 on 1 September 2026 for a proposed listing on Nasdaq and Nasdaq Texas. For the six months ended 30 June 2026 it reports revenue of $138,659 thousand and a net loss of $3,192,264 thousand. Net cash used in operating activities over the same six months was $55,597 thousand. Of the loss, $2,573,056 thousand is the change in fair value of a warrant liability created when the company issued warrants to an affiliate of OpenAI in January 2026 to win two data centre leases in Milam County, Texas.
Why it matters at your sizeGive a strategic customer a warrant for 5 per cent of your company to sign a five-year supply contract, and put a cash-settlement or adjustment feature in it, and the same three effects follow at your scale. The warrant becomes a liability that grows every time you raise at a higher price. The day-one value becomes a discount against the revenue on that contract, so the contract books at less than the invoice. And the fair value swings will not shelter a dollar of tax. Companies with $10 million to $500 million of revenue sign customer warrants routinely. Very few model the accounting before signing.
Sources: SB Energy, Inc., Form S-1 filed 1 September 2026, File No. 333-298675, CIK 0002133037: condensed consolidated statements of operations and comprehensive loss; condensed consolidated statements of cash flows; Note 17, Warrant liability; Note 20, Segments; Prospectus Summary. Percentages computed and labelled where they appear.
1. One reported loss, and the three numbers under it
The coverage on 1 September carried a single pairing. Reuters, published through BNN Bloomberg at 9:15 a.m. Eastern that day, reported that the company “reported a net loss of US$3.21 billion on revenue of $138.7 million for the six months ended June 30”. Both halves of that sentence are close to the filing and the first half is worth being precise about, because the filing carries two different losses.
The condensed consolidated statement of operations shows a net loss and comprehensive loss of $3,192,264 thousand for the six months ended 30 June 2026. Below it, $16,608 thousand of income is allocated to redeemable noncontrolling interests and noncontrolling interests, which leaves a net loss attributable to SB Energy, Inc. of $3,208,872 thousand. The loss before income taxes is $3,217,633 thousand. Rounded to two decimal places in billions, those three are $3.19 billion, $3.21 billion and $3.22 billion. The $3.21 billion in the wire copy is the attributable figure.
The number that does not appear in any of the coverage sits three statements away. Net cash used in operating activities for the same six months was $55,597 thousand.
The reported net loss for the half, divided by the cash the business actually consumed in operations over the same six months. Both figures are consolidated, both cover the six months ended 30 June 2026, and both come from the same set of statements.
The company's own management discussion sets out why, and does not hide it: cash used in operating activities “reflected a net loss of $3,192.3 million, partially offset by net noncash adjustments of $3,141.0 million, including $2,573.1 million loss on the change in fair value of the warrant liability, $589.5 million of stock-based compensation expense, $48.1 million of depreciation, amortization and accretion”. On those figures, 98.4 per cent of the reported loss is non-cash.
2. Why a rise in value became a charge
On 9 January 2026, in connection with the Milam County data centre leases and a related Foundation Agreement, the company issued 8,554,600 warrants to OpenAI Infra Holdings, LLC. The exercise price is nominal. The filing states plainly what the arrangement was for: “The warrant arrangement was intended as a material inducement for OpenAI to enter into the lease agreements”.
Note 17 then makes the classification call that drives everything after it: “The Warrants were determined to be liability-classified instruments.” The company recognised a warrant liability of $3,646,246 thousand at issuance, measured by a Monte Carlo simulation inside an option pricing framework.
A warrant over your own shares normally sits in equity, is measured once, and never troubles the income statement again. It only stays there if it passes a set of conditions, the central one being that it is indexed to the company's own equity and has no feature that could force settlement in something other than shares. Fail any of them and the warrant becomes a liability: carried at fair value, remeasured at every reporting date, with the movement in profit and loss. The company has not changed. The accounting has.
That single line is 80.0 per cent of the loss before income taxes for the half and 80.6 per cent of the net loss. The remeasurement is where the $2,573,056 thousand comes from, and the inputs are disclosed. The model starts from an estimate of the total equity value of Energy Global, LP, the parent whose common units the warrants convert into. The filing gives that estimate at both measurement dates: $29,768,938 thousand on 9 January 2026 and $44,500,000 thousand on 30 June 2026.
The parent's estimated equity value rose 49.5 per cent in under six months. The liability rose with it. Nothing about the business got worse in the period the charge belongs to. The charge is what the accounting does when a company that has promised shares becomes more valuable.
The rollforward is short enough to read in full, and it foots. The liability opens at nil on 31 December 2025, takes on $3,646,246 thousand of issuance, gives up $733,186 thousand to settlements when the first vested tranche converts into parent-level warrants, records a $45,824 thousand fair-value gain in the first quarter, and closes the quarter at $2,867,236 thousand. The second quarter then adds $2,618,881 thousand of fair-value loss to reach $5,486,117 thousand at 30 June 2026.
A footing note. The two quarterly fair-value movements net to $2,573,057 thousand. The income statement line for the half is $2,573,056 thousand. The $1 thousand difference is rounding inside the filed table, and it is reported here rather than smoothed over.
3. The same warrant is charged again, somewhere else
The last two sentences of Note 17 are the ones with the longest reach, and they have not been quoted anywhere in the coverage. “The corresponding initial cost of $3,646,246 thousand was accounted for as a lease incentive provided to OAI. Accordingly, the incentive will begin to be recognized as a reduction of revenue at lease commencement.” The note then records that as at 30 June 2026 the related leases had not commenced.
The related party section says the same thing in commercial language: the warrants “were agreed to be treated as a discount or allowance against payments required under those arrangements, including rent”.
When a supplier gives a customer something of value as part of winning or keeping the business, the value given is not a marketing cost. It is a reduction of the price. Accounting follows the economics: the amount comes off revenue as the revenue is earned, rather than sitting in expenses. The invoice says one number and the income statement reports a smaller one, for as long as the contract runs.
So one instrument produces two separate effects on reported results, in opposite directions and at different times. The fair-value movements run through profit and loss now, before any rent is due. The $3,646,246 thousand of day-one cost comes off revenue later, once the leases commence, across their term. Neither has anything to do with cash.
The Milam County leases have, per the filing, an initial term of 15 years each. Spreading the filed initial cost over that filed term straight line gives $243,083 thousand a year. Set against the company's total revenue for the year ended 31 December 2025 of $213,467 thousand, that annual figure is 113.9 per cent. Both numbers are arithmetic on filed inputs and are labelled as computed. The company has not disclosed an amortisation pattern, a commencement date or an allocation between the two buildings, and the August 2026 amendment described in section 5 may change the amount entirely. Nothing here forecasts what will be recognised.
The day-one cost of winning the anchor tenant, recorded as a lease incentive. It has not touched revenue yet, because the leases had not commenced at 30 June 2026. It is the largest single item in this filing that is not in any headline.
4. Fair value is on the other side of the income statement too
The reported revenue is worth the same attention as the reported loss, and the prospectus summary breaks it down without being asked. Total revenue of $138.7 million for the six months ended 30 June 2026 comprised $58.7 million from contracts with customers, $12.6 million of realised change in fair value of power price swap derivatives, and $67.4 million of unrealised change in fair value of those derivatives.
The unrealised mark is 48.6 per cent of the reported top line. It is not a sale, not a delivery and not a receivable. It is the movement in the value of hedging instruments, presented inside revenue. The company follows the same presentation in prior years, and 2024 is the striking one: of $232.2 million of revenue, $119.3 million, or 51.4 per cent, was an unrealised mark.
Fair value therefore adds roughly half the revenue and takes four fifths of the loss. A reader who takes either the top line or the bottom line at face value is reading a valuation model rather than a trading result.
A realised gain is one where the contract has settled and money has changed hands. An unrealised gain is the difference between what an open contract was worth last time you measured it and what it is worth now. Unrealised gains reverse when prices move back. Presenting them inside revenue is permitted for certain derivative arrangements, and it is disclosed here, but it means the revenue line is not a measure of what was sold.
5. The amendment that lands after the balance sheet date
Every warrant figure above is measured at 30 June 2026. Seven weeks later the arrangement was rewritten. Note 21, subsequent events: on 17 August 2026 the company entered into an amended and restated warrant agreement, and “in connection with the amendment, 4,562,791 warrant shares were forfeited and cancelled”. What remains is 3,991,809 warrant shares, at $0.01, expiring 9 January 2036, on a revised vesting schedule that now includes milestones tied to the offering itself.
That is 53.3 per cent of the original warrant count cancelled, after the date on which the liability was measured at $5,486,117 thousand. The note that follows is the honest one and it governs everything a reader might want to do with the number: “The Company is currently in the process of evaluating the accounting for the above transactions and the related impacts on its financial statements.”
So the most-quoted figure in the coverage, the roughly $5.5 billion of warrants said to have been issued to OpenAI, is a 30 June measurement of an instrument that was more than halved in count in August. What the next balance sheet shows is not knowable from this document, and no estimate of it appears here. What is knowable is that the largest liability on the balance sheet was restructured between the measurement date and the filing date, and that the company says so.
6. On the balance sheet, the customer outranks the lenders
At 30 June 2026 the warrant liability is $5,486,117 thousand, split $2,040,815 thousand current and $3,445,302 thousand non-current. Total liabilities are $11,408,752 thousand. The warrant is 48.1 per cent of everything the company owes.
Set it against the borrowings on the same balance sheet at the same date: debt, net, current of $1,197,859 thousand, debt, net, non-current of $2,694,016 thousand, and debt from related parties of $709,520 thousand. Those add to $4,601,395 thousand. The obligation to the anchor tenant exceeds every dollar of borrowed money by $884,722 thousand, and it is three and a half times total member's equity of $1,568,681 thousand at the same date.
Two further balance sheet facts belong beside those. Total liabilities rose from $3,985,819 thousand at 31 December 2025 to $11,408,752 thousand six months later. And cash and cash equivalents plus restricted cash fell from $574,178 thousand to $218,713 thousand over the same six months, a decline of 61.9 per cent, while financing activities brought in $3,758,657 thousand and investing activities used $1,706,243 thousand, of which $1,618.9 million went into construction in progress.
Note 13 then gives the forward commitment. As at 30 June 2026 the company had firm construction commitments totalling $6,259,410 thousand for the remainder of 2026 through 2028, alongside $1,141,608 thousand of letters of credit used against a $1,435,744 thousand facility, and $267,448 thousand of surety bonds. The construction commitment is 28.6 times the cash and restricted cash held at the same date. That is not a solvency observation, because the projects are financed at project level as they are built and the offering itself is a funding event. It is a statement of how much of this company's future has already been contracted for.
7. A $3.2 billion pre-tax loss and an 0.8 per cent tax benefit
Loss before income taxes for the half is $3,217,633 thousand. The income tax benefit is $25,369 thousand. That is a benefit of 0.8 per cent of the pre-tax loss. Strip out the warrant fair-value change and the remaining pre-tax loss is $644,577 thousand, against which the same benefit is 3.9 per cent. Both percentages are computed here and labelled as such.
The company's own explanation of the movement is narrow: the change “was mainly related to a decrease in deferred state taxes as a result of an increase in apportionable state losses over the prior period”. It also confirms that it has elected to be taxed as a corporation for United States federal income tax purposes and is subject to entity-level federal income tax.
The general principle is worth stating because it explains the shape rather than the detail: a fair-value movement on an instrument indexed to a company's own equity typically produces no deductible expense, so it creates book loss without tax loss. The filing does not set out a rate reconciliation for the interim period, so the arithmetic above is the extent of what these documents support.
8. Who is actually carrying the risk
Read the counterparties rather than the captions and a pattern appears that no single line item carries. Four arrangements, all disclosed, all with related or interlocking parties.
| Arrangement | Counterparty | Disclosed amount | What it does |
|---|---|---|---|
| Warrants, 9 January 2026 | OpenAI Infra Holdings, LLC | $3,646,246k at issue | Inducement for the Milam County leases, treated as a discount against rent |
| Residual value guaranties, 17 August 2026 | NVIDIA | $105bn aggregate | Guarantees the tenant's lease obligations on the initial 4.25 GW-IT at PORTS-Pike |
| Prepaid Forward Contract, 17 August 2026 | NVIDIA | $1.5bn prepaid | Shares delivered at 90 per cent of the offering price; part of $3.0bn total |
| Cosmos lease | A SoftBank Group affiliate | ~$2.5bn of rent | First expected data centre revenue; guaranty exposure of about $2.9bn |
Source: SB Energy, Inc., Form S-1 filed 1 September 2026: Recent Developments; Note 17, Warrant liability; Note 21, Subsequent events; Certain Relationships and Related Party Transactions; Business, Customer Contracts. Amounts as stated in the filing.
Three details in that table repay a second reading. The first is that the company does not pay for the NVIDIA guaranty: “We did not offer and do not owe any compensation to NVIDIA for the guaranties; such compensation is provided separately by OpenAI under a separate agreement.” The tenant pays a third party to guarantee the tenant's own rent.
The second is the price of the NVIDIA prepayment. The $1.5 billion prepaid on 17 August buys shares at the offering price “multiplied by 90%”. The other $1.5 billion, under a concurrent share purchase agreement for non-voting Class N stock, is at the offering price itself. Both were agreed before a price range existed.
The third is a single sentence in the related party section, and it is about the one arrangement in the table that involves the controlling shareholder. The board obtained an independent fairness opinion on powered land value for the Milam County leases, a third-party appraisal for the PORTS-Pike leases, and a third-party valuation for the investment associated with the OpenAI warrants. Then: “No independent fairness opinion, third-party valuation or benchmarking study was obtained in connection with the board's review and approval of the Cosmos lease.” The filing goes on to describe the process the board did follow, including recusals and outside counsel. Cosmos is the lease that is expected to produce the company's first data centre revenue, and the tenant is a SoftBank affiliate. Nothing here suggests that any disclosure was inadequate; the point is that the filing tells a reader which arrangement was tested by an outsider and which was not, and that is a question worth carrying into the prospectus rather than out of a headline.
9. Backlog and revenue, side by side, and deliberately not divided
The company reports approximately $439 billion of backlog, of which approximately $430 billion is in the data centres segment and approximately $10 billion in standalone power. The weighted average remaining contract length is 19.6 years for the data centre projects and 16.6 years for the power projects. Signed data centre lease capacity is approximately 8.8 GW-IT, of which 0.8 GW-IT is under construction and 8.0 GW-IT is the contracted but not yet started PORTS-Pike campus.
Note 20 gives the other half of the picture. Data centres segment revenue for the six months ended 30 June 2026 was $653 thousand. Standalone power contributed $138,006 thousand and the internal solutions segment $52,810 thousand, all of which is eliminated on consolidation. The prospectus summary states it directly: “No data center capacity is currently in operation.”
A note on what is not computed. $430 billion is a lifetime contracted figure across a weighted average of 19.6 years. $653 thousand is six months of reported revenue. They are on different bases and no ratio between them appears anywhere in this file. They are printed together because both are filed facts about the same segment on the same date, and because the distance between them is the entire investment question.
One more disclosure belongs here, because it is the smallest number in this file and one of the most instructive. Under the Foundation Agreement the company is obliged to purchase a minimum of $10.0 million, $15.0 million and $25.0 million of OpenAI software and services for 2026, 2027 and 2028 respectively, and OpenAI is its “sole and exclusive provider of AI products and services subject to stated exceptions”. The landlord buys from the tenant, on a floor, under exclusivity, for three years.
10. The measure the company manages by, and the gap it leaves
The chief operating decision maker, which the filing identifies as the leadership team comprising the co-chief executives and the chief financial officer, evaluates performance on Total Segment Adjusted EBITDA. That measure was $62,399 thousand for the six months ended 30 June 2026 and $119,934 thousand for the year ended 31 December 2025.
Positive $62,399 thousand against a net loss of $3,192,264 thousand for the same period is a gap of $3,254,663 thousand between the internal measure and the statutory one. The company discloses the reconciliation and warns that the measure may not be comparable to similarly titled measures used by other companies. The gap is not an argument against the measure. It is a reminder that in a filing where fair value drives both the top line and the bottom line, the non-GAAP number and the GAAP number are answering two different questions, and only one of them has to be audited.
The company also reports Net Debt of $1,810,042 thousand at 30 June 2026, defined as debt for borrowed money less cash and restricted cash, and stating explicitly that it excludes debt from related parties, letters of credit, guarantees and other non-debt liabilities. Balance-sheet borrowings including the $709,520 thousand owed to related parties are $4,601,395 thousand. Both figures are correct on their own definitions; they are not interchangeable, and the definitions are in the filing for anyone who reads that far.
What this is worth to a company with $10m to $500m of revenue
Three things to take from this filing
- Decide the classification of a customer warrant before you sign it, not at year end. Equity classification is a set of conditions, not a preference. A net cash settlement feature, a price adjustment tied to something other than your own shares, or a settlement that could be forced in cash will push the instrument into liabilities. From that moment every up round, every improved valuation and every good quarter increases a liability and reduces reported profit. Ask the question while the term sheet is still editable.
- Value given to a customer to win the contract usually comes off revenue, not out of expenses. Warrants, free periods, fit-out contributions, credits and rebates given to a customer are consideration payable to that customer. They reduce the transaction price and are released against revenue over the life of the arrangement. Budget for a top line that is lower than your invoicing, tell your lender before the covenant test rather than after, and check whether your revenue-based earn-outs and commission plans were written on invoiced or recognised revenue.
- When fair value sits on both sides of your income statement, publish the cash. This filing shows unrealised marks adding roughly half the revenue and a warrant remeasurement taking four fifths of the loss, with $55.6 million of cash actually consumed. If your accounts have that shape, a reader who is given only the top and bottom lines will misread you in both directions. Lead the management commentary with cash from operations and reconcile to it.
What to watch in the next filing
- The warrant liability at 30 September 2026, and the accounting the company adopts for the 17 August amendment that cancelled 4,562,791 warrant shares. It says it is still evaluating it.
- The first appearance of the lease incentive as a reduction of revenue, which begins at lease commencement, and the amortisation pattern chosen for it.
- Rent commencement at Cosmos, structured to occur on the earlier of 11 December 2026 or the relevant phase achieving ready for service status. It is the first data centre revenue in the file.
- Whether NVIDIA exercises its discretion to guarantee the remaining 3.78 GW-IT at PORTS-Pike, and what happens if it does not, given the filing's statement that OpenAI would then have to find a replacement guarantor rated at least A- or equivalent.
- The split of revenue between contracts with customers and derivative marks, which the company has disclosed voluntarily in the summary and which is the fastest way to read the top line.
- Firm construction commitments against liquidity after the offering, from $6,259,410 thousand and $218,713 thousand of cash and restricted cash at 30 June 2026.
Sources
| Document | Filed or published | Used for |
|---|---|---|
| SB Energy, Inc., Form S-1, File No. 333-298675, CIK 0002133037 | 1 September 2026 | Every figure and every quotation in this file |
| SB Energy, Inc., Form S-1/A (exhibits only) | 4 September 2026 | Confirming the prospectus text was not amended |
| SEC EDGAR filing index for CIK 0002133037 | Read 7 September 2026 | Filing history, including the confidential draft submissions of 22 May, 23 June and 22 July 2026 |
| SoftBank Group Corp., “SB Energy Announces Public Filing of Registration Statement for Proposed Initial Public Offering” | 2 September 2026 | Listing venue, ticker and bookrunners |
| Reuters, “SoftBank-backed SB Energy files for U.S. IPO as AI turbocharges infrastructure demand”, published through BNN Bloomberg | 1 September 2026, 9:15 a.m. Eastern | Attributed only, and tested against the filing |
No analyst estimate, price target, valuation, social media post or unnamed source was used. The reported prospect of a valuation above $50 billion appears in the Reuters copy citing its own earlier reporting; it is attributed here and used in no calculation. There is no public market in the company's shares, so no price or market capitalisation appears in this file.
Questions this file answers
Did SB Energy really lose $3.2 billion in six months?
It reported a net loss of $3,192.3 million for the six months ended 30 June 2026, and a net loss attributable to SB Energy, Inc. of $3,208.9 million. The two figures differ because $16.6 million of income was allocated to noncontrolling interests. Net cash used in operating activities over the same six months was $55.6 million. The company's own MD&A attributes $3,141.0 million of the loss to net non-cash adjustments.
What is the warrant charge and why is it so large?
On 9 January 2026 the company issued 8,554,600 warrants to an affiliate of OpenAI as an inducement to sign data centre leases at Milam County, Texas. The warrants are liability-classified, so they are remeasured to fair value every reporting date and the movement goes through profit and loss. The company's Level 3 model values the warrants off the equity value of its parent, Energy Global, LP, which it estimated at $29,768,938 thousand on 9 January 2026 and $44,500,000 thousand on 30 June 2026. That increase produced a $2,573.1 million charge for the half.
So the company was charged for becoming more valuable?
On these facts, yes, and that is how liability classification works. When an instrument settled in the issuer's own equity fails the conditions for equity classification, it sits on the balance sheet as a liability and every rise in the issuer's value increases what is owed. A profitable half and a rising valuation can therefore produce a larger reported loss, with no cash involved.
Does the warrant cost hit the income statement again later?
The filing says the initial cost of $3,646,246 thousand was accounted for as a lease incentive provided to the tenant and that the incentive will begin to be recognised as a reduction of revenue at lease commencement. As at 30 June 2026 the related leases had not commenced, so none of it had reached revenue. The fair-value movements and the incentive amortisation are two separate effects of one instrument.
How much of the reported revenue is actual sales?
For the six months ended 30 June 2026, total revenue of $138.7 million comprised $58.7 million from contracts with customers, $12.6 million of realised change in fair value of power price swap derivatives and $67.4 million of unrealised change in fair value of those derivatives. On the same disclosure, unrealised marks were $119.3 million of $232.2 million of revenue in 2024 and $63.3 million of $213.5 million in 2025.
What changed after the balance sheet date?
On 17 August 2026 the warrant agreement was amended and restated. The filing states that 4,562,791 warrant shares were forfeited and cancelled, leaving 3,991,809. On the same date NVIDIA provided residual value guaranties of the tenant's lease obligations at the PORTS-Pike campus with an aggregate guaranteed value of $105 billion, and prepaid $1.5 billion under a forward contract priced at 90 per cent of the initial public offering price. The company states it is evaluating the accounting for these transactions.
Unfolding Values holds no position, long or short, in the securities of any company named in this file, and has no relationship of any kind with SB Energy, Inc., SoftBank Group Corp., OpenAI or NVIDIA. This is a reading of public documents and is not investment advice, not a recommendation and not an audit. Unfolding Values is not an audit firm and expresses no opinion on any financial statement. Every figure is traced to the filing named beside it. Percentages, multiples and per-annum figures marked as computed are arithmetic performed here on filed inputs, with the basis of each numerator and denominator stated. Where a document does not support a number, none is estimated. The registration statement is not yet effective and the securities described in it may not be sold before it becomes effective.
The principals at Unfolding Values have led SEC reporting and served as principal accounting officer for US-listed issuers, and the review that produced this file is the same review applied to a client's own 10-K or 10-Q before it goes out. Start a conversation.