A Nvidia-backed data centre operator has abandoned plans for what would have been one of the world’s biggest listings this year in a sign of growing investor wariness of lofty AI valuations.
Firmus, which had aimed to raise $5bn at a $30bn valuation, said on Friday it had withdrawn its application to list in Sydney in light of “recent market volatility and prevailing market conditions”.
“The board determined that the terms on which the offer could proceed would not appropriately reflect the strength of the company’s business and long-term growth outlook,” Firmus said.
Firmus struggled to convince investors to buy into the initial public offering at its target price, highlighting concerns with ambitious AI financing and whether valuations align with the industry’s prospects.
The listing would have been Australia’s largest since telecoms operator Telstra made a $10bn debut in 1997.
A person familiar with the deal said the Australian company would instead look to raise capital through a private round.
“Firmus is probably one of the most polarising IPOs I have ever seen,” said Jun Bei Liu, founder of asset manager Ten Cap. “They might deliver cheaper earnings in two years if they build what they promise, but that’s speculative.”
Firmus was founded in 2019 as a bitcoin miner in Australia before switching to data centre services. It has ambitions to build “AI factories” using chips from Nvidia, which participated in a funding round in August that valued Firmus at more than $10.5bn.
The company is also backed by global investors including Jane Street and funds managed by Blackstone.
While Firmus has signed contracts for more than 900 megawatts of capacity, it only has 46 megawatts in operation across two facilities in Australia and Singapore. Five data centres are under construction, with a target to begin operations in the next two years.
“We think that Firmus indeed has a compelling story; it just doesn’t have a compelling valuation,” John Pearce, chief investment officer of Australian pension fund UniSuper, said in an investment update published on Thursday before Firmus pulled its IPO.
“So much has to go right to justify the valuation. Furthermore, we’re quite concerned that Firmus will have to keep coming back to the market for a lot more debt and more equity to fund its expansion plans,” he added.
In recent months, some of the biggest AI companies have warned about the technology’s existential risks and called for a slowdown in development. Globally, there is also discontent with data centres and the resources needed to power them.
Interest rate rises have added to pressure on AI companies, which rely heavily on debt to fuel their infrastructure build-out.
Higher borrowing costs have made government bonds more attractive, meaning “investors may demand more reasonable valuations” from tech companies, said Jason Lui, head of Asia-Pacific equities and derivatives strategy at BNP Paribas.
“Investors will require more evidence on the growth prospects of these firms,” he said. “The opportunity cost is higher.”
Additional reporting by Nic Fildes in Melbourne