I haven’t checked, but I suspect the return is less than they would have gotten just sticking the money in an S&P 500 index fund over the same 14 years. Still, the risk is lower.
Even if true today, very unlikely to be true in the long run. From the numbers provided in the title, this deal is like an effectively risk free 16% yielding bond, except the revenues will also grow with inflation.
And it's definitely not true on a risk adjusted or cash flow basis. Also these deals can be (and probably was) levered to levels which equity investments cannot. Borrow at SOFR+x% and earn on the spread between that value and 16%. Extremely profitable and uncommon carry trade
If everyone invested in the S&P 500 we would all be rich. Companies should raise capital just to buy S&P 500 index fund so we can finally have universal prosperity.
Except the profit can also be reinvested. That kind of free cash flow is pretty insane - and will help dollar cost average any equity investments during down markets, compared to just lump sum investing $1.5B and letting it ride.
