Firmus Technologies May Cut Valuation or Shelve ASX IPO, Guardian Australia Reports

On Thursday, Firmus abruptly withdrew from a scheduled appearance at a parliamentary inquiry into artificial intelligence, as discussions continued over how to save what had been billed as the largest IPO in Australia in decades. Firmus was contacted for comment. Guardian Australia reported that most of the alarm about the company has centred on a near $44bn valuation for a business still in its start-up phase.

Its backers were confident of obtaining that valuation only days ago, but are now frantically re-pricing to find a level investors will be comfortable paying before the anticipated ASX listing. “The whole thing was getting fanciful,” said one investment manager briefed on the float. “It’s a business that’s losing hundreds of millions of dollars, and yet its valuation kept going up nonstop every couple of months.”

In the lead-up to the listing, Firmus raised money from large investors including chip maker Nvidia and Wall Street firms Blackstone, Jane Street and Coatue. Just over a year ago, Firmus was worth less than $2bn, based on the value placed on it by Nvidia and others when they took equity stakes. Successive capital raisings by many of the same core investors drove the valuation from $1.85bn to $15bn about eight weeks ago. That rose to almost $44bn just days ago, though the figure is being heavily unwound because of tepid support.

Firmus has sought to sell investors on surging AI expenditure by building and operating liquid-cooled “AI factories” packed with Nvidia graphics processing units, or GPUs. But the key risk facing investors is not whether AI will keep growing, but whether they are paying too much for a company facing operational obstacles. Firmus has only two small operational sites alongside seven contracted and four planned facilities. While it has contracts with Meta, OpenAI and Nvidia, about 97% of contracted revenue sits on sites that are not yet built, according to Minotaur Capital co-founder Armina Rosenberg. “You only get near the offer price if delivery, financing and renewals all go to plan,” Rosenberg said.

The high valuation and the future earnings needed to support it rely on prompt construction of that unbuilt pipeline, at a time when local communities are rebelling against similar developments. Firmus’s focus on Asia avoids the growing community backlash against datacentres in Australia and the US, Rosenberg said, but it has its own hurdles including power constraints and construction times.

The valuation also assumes that heavy AI expenditure from hyperscalers such as Microsoft, Google and Meta continues unabated. When that spending slows, third-party datacentres could be among the first to feel the cold. Morningstar analyst Lochlan Halloway, drawing on economist Charles P. Kindleberger’s five-stage bubble framework—displacement, boom, euphoria, distress and revulsion—warned that market sentiment surrounding Firmus had entered the euphoric phase. That does not mean Firmus is empty hype, Halloway said; the risk lies in whether investors are paying far too steep a price.

Firmus’s plans to list on the ASX on 23 October, in what would have been the largest IPO since Telstra in 1997, are now in doubt. Investors were going to be asked to pay $11 per share. That price will either be radically reduced, slashing its valuation, or the float will be withdrawn altogether.