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 on Friday, opting for a private fundraising round ahead of a potential New York share sale.
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.
"The
company will now pursue capital from private markets and consider alternative international public market options to support its next phase of growth," said co-founders Oliver Curtis and Tim Rosenfield in a letter sent to shareholders and reviewed by Reuters.
"We will continue to assess opportunities that provide the best platform to fund growth, create value and position Firmus for success."
Firmus would aim to complete a Nasdaq listing after its next private fundraising round was finalised, a person involved in the transaction said. The person could not be named discussing information that was not public.
The company declined to comment on whether it would target a Nasdaq listing.
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.
DATA CENTRE PARTNER'S EXIT SOWED DOUBTS
Firmus initially planned to sell its shares at A$11 each, giving it 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.
The pricing came under pressure as investors grew concerned about the company's debt pile, its lack of a track record in building AI data centres and media reports about a key partner pulling out of an A$73 billion data centre development deal.
Firmus currently has two leased online data centres in Melbourne and Singapore and plans to build five more across the Asia-Pacific. Its draft prospectus said it would make $5 billion in annual earnings within five years from the data centres.
"They were asking for a very big price tag for what would likely be expected to happen in the future assuming near flawless execution," said Joseph Koh, a portfolio manager at Blackwattle Investment Partners, who looked at the Firmus IPO but did not bid for stock.
"And so I think the market wasn't comfortable taking that leap of faith quite at this stage yet," he said.
The term sheet sent when the deal was launched said indicative offers for the IPO were already enough to cover the transaction. Investors started to pull those orders on Wednesday, after CDC Data Centres CEO Greg Boorer told an Australian podcast Rampart its plan to develop 1.6 gigawatts of AI factories with Firmus was no longer underway, two people involved in the IPO said.
Investors also balked after being told on Tuesday the deal's escrow arrangements would have allowed more than half the stock to be sold by existing investors from day one, which could have hurt Firmus' early trading performance.
Firmus considered cutting the issue price to entice more investors, one of the people involved in the deal said, but opted instead to look towards a private funding round.
The bookbuilding was led by Bank of America, JPMorgan, Morgan Stanley and Australian broker Morgans.
VALUATION WORRIES
With debt of about $30 billion, according to analysts working for the joint lead managers, the company founded in 2019 would have had an enterprise value of $60 billion, more than some of Australia's longest-established companies.
Fund manager Ten Cap's co-founder Jun Bei Liu said the pulled Firmus deal showed a broader shift was taking place in which investors were becoming more focused on the economics of AI investments and converting infrastructure spending into returns.
"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," Liu said.
"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."
The world's largest technology companies, including Nvidia and SpaceX, are still busy tapping debt markets for tens of billions of dollars, while Anthropic is seeking to raise as much as $100 billion in an IPO.
But in the latest sign of investors' concerns about returns from AI, 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 revenue was $20 billion less than the company previously signalled.
(Reporting by Scott Murdoch, Christine Chen and Renju Jose in Sydney; Editing by Sonali Paul)
