Nvidia-Backed Firmus Scraps $5 Billion Australia IPO Amid AI Sector Scrutiny

Firmus, an Australia-based data centre operator backed by Nvidia, has shelved its planned $5 billion IPO in Australia. The decision, made on Friday, reflects growing investor concerns regarding the AI sector's valuations, the company's debt burden, and its ambitious data centre expansion plans, according to BS Personal Finance.

Following the IPO's cancellation, Firmus will now pursue a private fundraising round. A person involved in the transaction, who could not be identified, indicated this would be followed by a Nasdaq listing. Co-founders Oliver Curtis and Tim Rosenfield stated in a letter to shareholders that the company would seek “capital from private markets and consider alternative international public market options to support its next phase of growth,” aiming for the “best platform to fund growth, create value and position Firmus for success.”

The shelved IPO would have ranked as Australia's second-largest new share sale in history and the fourth-largest public offering globally so far this year, behind SpaceX, CXMT Corp, and Cerebras Systems, according to Dealogic data. Its withdrawal signals that investors are becoming increasingly selective about AI issuers, despite a massive wave of fundraising via debt and equity in the sector.

Firmus, also backed by Coatue Management, Blackstone, and Jane Street, designs and operates modular AI factories using proprietary energy and cooling technology. The company initially planned to sell shares at A$11 each, which would have given it an equity valuation of $30.6 billion. This figure was nearly triple the $10.5 billion valuation it achieved after a fundraising round at the start of August, raising investor concerns.

Concerns among investors intensified over Firmus's substantial debt pile and its limited track record in building AI data centres. Media reports further highlighted doubts after a key partner reportedly pulled out of an A$73 billion data centre development deal. Firmus currently operates two leased data centres in Melbourne and Singapore and plans to construct five more across the Asia-Pacific region, with its draft prospectus projecting $5 billion in annual earnings within five years from these facilities.

Joseph Koh, a portfolio manager at Blackwattle Investment Partners, noted that Firmus was “asking for a very big price tag for what would likely be expected to happen in the future assuming near flawless execution.” Koh, whose firm considered but did not bid for the IPO, added that “the market wasn’t comfortable taking that leap of faith quite at this stage yet.”

The IPO bookbuilding process, led by Bank of America, JPMorgan, Morgan Stanley, and Australian broker Morgans, initially saw indicative offers sufficient to cover the transaction. However, investors began withdrawing their orders on Wednesday. This followed CDC Data Centres CEO Greg Boorer's podcast comments that their plan to develop 1.6 gigawatts of AI factories with Firmus was no longer underway, according to two people involved in the IPO. Investors also reacted negatively to escrow arrangements allowing over half the stock to be sold by existing investors from day one, which could have impacted early trading performance.

Analysts working for the joint lead managers estimated Firmus’s debt at approximately $30 billion, which would have resulted in an enterprise value of $60 billion for the company, founded in 2019. This valuation would have surpassed some of Australia’s longest-established companies. Oscar Oberg, lead portfolio manager at Wilson Asset Management, an existing Firmus investor, expressed disappointment, stating, “The market has spoken.” Bloomberg reported that Firmus is exploring raising up to $3 billion from existing investors.

Jun Bei Liu, co-founder of fund manager Ten Cap, interpreted the pulled deal as “an important reality check for the AI investment boom,” indicating a broader shift where investors are prioritizing the economics of AI investments and the conversion of infrastructure spending into returns. Liu acknowledged “Firmus-specific issues,” including the rapid increase in its valuation, the enormous capital requirements, and the execution risks associated with its ambitious expansion plans.

While major tech companies like Nvidia and SpaceX continue to tap debt markets for billions, and Anthropic seeks a $100 billion IPO, investor caution is evident. US-listed chipmakers, which had soared over 80% this year, fell 3.4% on Thursday following reports that OpenAI’s annualized revenue for September dropped from earlier signals.

What to watch: How investor scrutiny continues to shape valuations and funding for AI infrastructure companies.

Editor's note: Comprehensive coverage of the Firmus IPO collapse, integrating all key figures, sources, and context provided in the source text.