The tremors that have rippled through global stock markets this week, amid growing concern about the valuations of AI-related companies and the huge sums they are spending, have their roots in the decision to abandon a blockbuster IPO in Australia.
Firmus, a data center operator backed by Nvidia and Blackstone, announced a planned listing last Friday that would have been Australia’s second-largest IPO and would have valued the company at A$44 billion ($30.5 billion).
Days later, another Australian data center company – AirTrunk – canceled the Singapore listing of a real estate investment trust, blaming market conditions.
The problems came amid a sharp decline in microchip and AI stocks, driven by rising inflation and concerns about the huge levels of debt needed to meet investment pledges.
CoreWeave chief executive Mike Intrator highlighted difficulties in Australia on Thursday as he defended his US company ‘neocloud’ after its share price fell.
“Factors such as weakness and delays surrounding IPO and debt financing attempts by Firmus, AirTrunk, Lambda Labs and Nscale, etc., are feeding into the narrative around CoreWeave,” he said in a note seen by the FT. These companies were trying to raise “huge amounts of capital without the execution, revenue and scale” of his business, Intrator said.
Investors dumped debt issued by some neo-cloud companies, with CoreWeave bonds falling below 80 cents on the dollar – prices generally considered distressed, the FT reported on Thursday, pushing yields to almost 15 percent.
Firmus and AirTrunk’s struggles could undermine Australian attempts to transform itself into a natural home for investment in artificial intelligence and data centers. Australia has sought investment from global groups including Anthropic and OpenAI, highlighting the government’s rapid shift to renewable energy sources to gain a foothold in the global AI market.
Andrew Charlton, Australia’s junior minister for science, technology and the digital economy, said in a speech in Sydney in June that AI investors were choosing Australia over other countries because of its stable political environment, the Five Eyes security agreement and its renewable energy potential.
“Australia has quietly become one of the most attractive destinations in the world, ranked second in the world in 2024, behind the United States,” he told the Sydney Institute.
Australian investors including Macquarie and domestic pension funds have long been active in digital infrastructure – including data center companies such as AirTrunk and Vantage Data Centers in Europe – to support start-ups looking to provide the plumbing for an AI-led data boom.
It is in this context that the Firmus IPO campaign began. Co-founders Oliver Curtis and Tim Rosenfield, his cousin, were part of a new generation of Australian AI entrepreneurs that includes US-listed Nscale founders Iren and SharonAI.
Firmus was founded in 2019 as a Bitcoin miner in Tasmania before moving into AI infrastructure and gaining support from Nvidia. Curtis is the son of former Macquarie banker Nick Curtis, who ran rare earths company Lynas earlier in his career and remains an investor in Firmus.
Oliver Curtis gained attention due to his 2016 conviction and 12-month stint in prison for insider trading when he was 30 years old.
The investor said “tall poppy” syndrome had also played a role, with Curtis seen by some potential shareholders as “an ex-felon with his shirt open, flying around in private jets”.
Billionaire investor James Packer, meanwhile, said this week that “Australia tends to tear down aggressive entrepreneurs and America builds them up.”
The $30 billion valuation Firmus sought – double that set in a fundraising just three months ago – also looked stratospheric compared to more established data center players including NextDC, Goodman Group and CDC Data Centres.
The Firmus listing would have raised more than the A$6.7 billion market capitalization of NextDC – a company that reported revenue of almost A$500 million and net profit of A$82 million in the financial year ended June. Some super funds, notably UniSuper, refused to participate in the IPO due to the high valuation attributed to Firmus.
The revelation, a week after the listing, of the failure of a multibillion-dollar deal between CDC and Firmus, called Project Southgate, also spooked some potential shareholders, according to a person with direct knowledge of the situation.
Firmus said it would seek new financing avenues, both private and public, to expand in Asia and allayed fears that its domestic investments were under threat. “Nothing has fundamentally changed in the business. Firmus remains well positioned to execute its plans, invest in its projects and serve its customers and communities, including those in Tasmania,” the company said.
Firmus had net debt of nearly $1 billion at the end of June, but a $2 billion capital raise backed by Blackstone and Coatue in August put it in a net cash position. However, investors expected the company to raise up to $30 billion in debt after the IPO to fund the construction of data centers in Australia and Asia.
Some investors have raised concerns about the projected debt level, which would represent a debt-to-earnings ratio of six times Firmus’ projected profits in 2028. Firmus will now turn to private markets to borrow and may have to pay a high price to secure its debt in the current market, investors say.
The appetite for “neocloud” stocks on the Australian Stock Exchange could soon be tested again. SharonAI, which is based in Sydney but listed on Nasdaq under the symbol SHAZ, remains committed to pursuing a secondary listing in Sydney despite Firmus’ failure.
Shares of SharonAI have fallen by almost a fifth in the past five days, valuing the company at $1.1 billion. The company, which also has a partnership with Nvidia, said it has built 212 megawatts of capacity and 120 megawatts contracted.
Morgans, the broker and wealth manager which raised funds for Firmus and was an adviser on the IPO, held its annual investment conference in Noosa, north of Brisbane, this week.
“The mood is not good right now,” said Jun Bei Liu, founder and senior portfolio manager of investment firm Ten Cap, who attended the event. She said Firmus and his advisers should have handled the flutter better. “They got greedy. They should have been more realistic.”
Firmus’ IPO underwriters, including Morgan Stanley, JPMorgan and Bank of America, have not publicly commented on the decision to delist, which the company said reflects “recent market volatility and current market conditions.”
Wes Maas, former rugby union player and founder of the Maas property group, has withdrawn from hosting a Morgans conference lunch. Maas sold a building materials business earlier this year and invested in Firmus in a deal brokered by Morgans. Maas shares have fallen by almost a third in the past month, making them worth about A$1.4 billion.
It may be too early to dismiss Australia’s chances of capturing a significant share of the global AI market over time. Established companies like Goodman and AirTrunk have well-established financial backing and have long-term agreements that continue to grow.
Commonwealth Bank of Australia economist Lucinda Jerogin said the country’s data center portfolio was growing “at a rapid pace” and offered a range of features attractive to foreign investors.
The Commonwealth Bank said Australia’s data center pipeline stood at 23 gigawatts based on public announcements, up from about 6 gigawatts in February, although only a quarter of that capacity has been approved or is under construction.
For some investors, this portends an opportunity to invest in “real gems” in AI and data center-related companies, including construction and engineering companies with confirmed contracts.
“They will continue to benefit from this intergenerational growth, but it will become increasingly difficult for those who want to get rich quick,” Liu said.
Additional reporting by Ryan McMorrow in San Francisco
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