Firmus IPO in doubt as books close without set price

Firmus closed the books on its planned Australian float on Thursday, Oct. 8, without setting a price or deal structure. Its bankers were working to rescue the listing at about A$8.25 a share, after fund managers turned away from the marketed A$11 price. At A$11, the Nvidia ↘ 0.52%-backed data centre operator would have been valued at about A$43.7 billion ($30.4 billion), and the deal would have raised up to $5.5 billion, including an over-allotment option. That would have made it Australia's biggest new share sale since Telstra listed in 1997.reuters+3

Investors were told only that "the joint active bookrunners will provide further information in relation to the offer," according to a term sheet reviewed by Reuters. Earlier in the week, Firmus said early bids were well above the size of the offer, and it moved the bookbuild deadline forward by a day. The Australian Financial Review's Street Talk column reported that Firmus may need to accept A$6 to A$7 a share to complete the deal. It is still scheduled to list on the ASX on Oct. 23.afr+4

Why investors pulled back

Bloomberg spoke with 10 investors and advisers. They cited Firmus's lack of a track record, its valuation, and the risk that existing shareholders would sell soon after listing. About 57.6% of shares would be free to trade from the first day, with escrow covering 42.4%. Stakes held by Nvidia, Blackstone ↗ 1.43% and Coatue are not subject to escrow. Local super funds and institutions showed little interest, and the deal relied on overseas demand, according to Capital Brief. Overseas demand was also weaker than expected.capitalbrief+3

UniSuper chief investment officer John Pearce said Firmus had "a compelling story" but lacked "a compelling valuation". Ten Cap's Jun Bei Liu said 97% of the data centre capacity Firmus has promised has not been built. Firmus currently runs two data centres. It was valued at $10.5 billion in a funding round in August. Separately, its A$73 billion partnership with CDC has ended.moomoo+4

Maas plunges, short seller circles

Maas Group, which owns 3.2% of Firmus, fell as much as 30% in Sydney trading before closing down 22.4%. The drop wiped about A$517 million off its market value. Responding to a query from the ASX, Maas said speculation over whether the IPO would go ahead had weighed on its shares.reuters

Plato Investment Management, a hedge fund managing A$6 billion, has identified 30 red flags at Firmus. It is preparing to short the stock if the company lists.afr

The trouble comes as investors grow more cautious about spending on AI infrastructure. "Firmus was poised to become one of the largest IPOs in Australian history; from that perspective, this can be described as a historic failure," said Phil Wool of Rayliant Global Advisors.moomoo