The agreement
Amazon and Generac, the US maker of generators, signed a transaction agreement on 16 September under which Generac issued Amazon a warrant to buy its shares and the two companies entered a long-term supply agreement for backup generators, according to Generac’s filing with the US Securities and Exchange Commission.
The filing says initial deliveries of backup generators are expected to total $2.4bn in 2027 and 2028. The generators are for Amazon’s data centres.
How the warrant works
The warrant, issued to Amazon.com NV Investment Holdings, an Amazon subsidiary, covers up to 1,693,745 Generac shares at an exercise price of $200.9266 each and runs until 16 September 2033. At that price, exercising the full warrant would cost about $340m.
Of those shares, 307,954 vested immediately. The filing says the rest vest in several tranches “contingent upon aggregate gross payments, net of certain offsets,” that Generac receives from Amazon for backup power generators for its data centres, “up to a total of $8 billion.” In other words, Amazon earns the right to more of Generac’s equity the more generators it buys.
The agreement attached to the filing says the warrant represents at least 2.57% of Generac’s fully diluted common stock at signing. Amazon can exercise it for cash or on a cashless basis, and it carries anti-dilution protection.
The market reaction
Generac shares jumped in extended trading after the announcement, Seeking Alpha reported, on the $2.4bn in expected deliveries.
Why it matters
Data centres keep diesel or gas generators on site so servers stay up if grid power fails, and every new AI campus needs them in bulk. The warrant structure ties Amazon’s stake to its own spending, so it shares in the growth its orders create.
For Generac, the deal is a large bet on the data centre market. The next markers are whether Amazon’s purchases track towards the $8bn ceiling that would vest the whole warrant, and whether other cloud companies strike similar arrangements.
