Firmus Faces Potential Valuation Cut Ahead of Major ASX Share Market Float

The highly anticipated share market float of Australian data center company Firmus appears to be facing significant challenges as it approaches its scheduled October 23 debut on the Australian Securities Exchange (ASX). According to reporting by ABC News, the company has concluded its bookbuild process—where investment banks solicit bids for shares—amid reports of lackluster investor interest.

Firmus, which operates "AI factories" for training artificial intelligence models, had initially intended to list at $11 per share in a float valued at $44 billion. However, market participants have reportedly voiced concerns regarding the company's debt levels, substantial energy requirements, and what some analysts describe as an "unprecedented lack of detail" in its disclosures. These factors have led to reports that the company may need to re-price its shares downward, potentially to approximately $8 per share.

The company’s valuation has seen a rapid increase, rising from roughly $6.9 billion in April to $15.5 billion. Morningstar senior market strategist Lochlan Halloway noted that the firm’s reliance on borrowing against customer contracts to purchase chips creates a heavily geared model. Once construction is complete, the company expects to carry approximately US$30 billion in debt, which Mr. Halloway observed is roughly six times its forecasted 2028 operating earnings.

Investor caution has been further compounded by criticism from market figures such as Ten Cap portfolio manager Jun Bei Liu, who stated she would avoid the IPO due to structural risks and the fact that 97% of the data center capacity previously promised by the company has not yet been built. Additionally, the company faces scrutiny over the potential impact of its growth plans on electricity infrastructure. Naomi Wagura of Accela Research noted that Firmus's proposed data centers in Tasmania would require 444 megawatts of power, necessitating significant upgrades to the state's energy generation.

Amid these developments, Firmus representatives withdrew from a scheduled appearance at a parliamentary inquiry into artificial intelligence on Wednesday, with reports suggesting the pressures of the pending IPO were the primary reason for the absence. The company, which counts co-founder Oliver Curtis among its leadership, has stated plans to expand its AI facilities across Australia and into South-East Asian markets.