By Scott Murdoch and Christine Chen
SYDNEY, Oct 9 (Reuters) – Australia’s Firmus, a data centre operator backed by Nvidia, shelved its $5 billion initial public offering, citing market volatility and conditions, and said it would opt for a private fundraising round instead.
Firmus’ IPO would have been the second-largest new share sale in Australia’s history but met lukewarm demand, a warning sign that investors remain selective about AI issuers even as the artificial intelligence boom drives global markets.
“Firmus will now pursue capital from the private markets and consider alternative public and private market options,” Firmus said in a statement, adding the terms did not correctly reflect the strength of its business and long-term growth outlook.
“The board therefore concluded that proceeding with the offer was not in the best interests of the company and its shareholders,” it said.
The company initially planned to sell its shares at A$11 each, giving Firmus an equity valuation of $30.6 billion, nearly triple the $10.5 billion valuation it achieved following a fundraising round at the start of August.
Firmus, backed by major AI companies and investors Nvidia and Coatue Management, along with Blackstone and Jane Street, designs and operates modular AI factories using proprietary energy and cooling technology.
It currently only has two online in Melbourne and Singapore. Five more planned across the Asia-Pacific are in early stages of development.
“I think the Firmus situation represents an important reality check for the AI investment boom, but I wouldn’t interpret it as the beginning of the end of the AI trade,” said Jun Bei Liu, co-founder of fund manager Ten Cap, who has been critical of the Firmus IPO.
“There are certainly Firmus-specific issues, particularly around the speed of its valuation increase, the enormous capital requirements and the execution risks associated with delivering its ambitious expansion plans.”
Liu said there was a broader shift taking place in which investors were becoming more focused on the economics of AI investments, returns on capital and converting infrastructure spending into returns.
Cumulative spending globally on data centres alone could top $30 trillion by 2050, according to a projection by PwC.
DEBT PILE WORRIES INVESTORS
In the latest sign of investors’ concerns, US-listed chipmakers, which have soared over 80% so far this year, fell 3.4% on Thursday in the wake of a report from the Financial Times that OpenAI’s annualised revenues were $20 billion less than the company previously signalled.
Firmus has about $30 billion worth of debt, according to analysts working for the IPO’s joint lead managers, meaning the enterprise value would have been about $60 billion. The deal would have made Firmus, founded in 2019, more valuable than some of Australia’s longest-established companies.
The deal’s term sheet sent out when the deal launched had said indicative offers for the IPO were already enough to cover the transaction size. But potential investors told Reuters they were sceptical about the company’s burgeoning valuation, ability to execute on its ambitious growth plans and hefty debt pile.
Firmus said in a draft prospectus it would make $5 billion in annual earnings within five years from its portfolio of data centres, but most of those have yet to be built.
Investor grew more concerned about Firmus’ huge increase in valuation after they were informed on Tuesday about the deal’s escrow arrangements that would have allowed more than half the stock to be sold by existing investors from the proposed first day of trading.
(Reporting by Scott Murdoch, Christine Chen and Renju Jose in Sydney; Editing by Sonali Paul)
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