(Bloomberg) — The sudden drop in demand for an Nvidia-backed data center company’s IPO reveals new cracks in the AI funding boom.
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The planned $5.5 billion listing by Australian firm Firmus Grid Ltd. became shrouded in uncertainty after the deal failed to attract adequate support for the share price trading at A$11, according to people familiar with the matter.
Some investors grew cautious just days after the company said it had received signs of interest well beyond the size of the offering, putting it on track for a $30 billion valuation, the sources said. Although Firmus closed its order books on Thursday, it has so far given no clear guidance on the price or structure of the deal, an unusual lack of communication that is fueling speculation that the price could be reduced or the IPO canceled altogether.
The deal underscores growing concern about the amount of capital AI infrastructure companies are demanding from public markets at a time when borrowing costs are rising. Much of Firmus’ valuation rests on the fact that the company has successfully built a pipeline of data centers across Asia serving clients such as Meta Platforms Inc. and OpenAI. It currently operates two data centers. Proceeds from the IPO were needed to help finance the construction of the wider network.
“Investors still believe in AI,” said Maxence Visseau, Dubai-based investment director at Arkevium Capital, a multi-strategy investment firm. “What they won’t do is pay any price for companies that spend huge sums on data centers, depend on a few big customers and promise profits years from now.”
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Concerns about Firmus ranged from a lack of proven track record to high valuations and the risk that existing shareholders could flood the market soon after listing – with around 58% of shares free to trade on day one – according to discussions with at least 10 investors and advisers. Increasing regulatory oversight and stricter financing requirements for data centers have also been cited as a deterrent.
A representative for Firmus did not respond to requests for comment.
UniSuper, one of Australia’s largest superannuation funds, was among the institutional investors who did not participate in the IPO.
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