The Zhitong Finance App learned that, according to people familiar with the matter, after a series of artificial intelligence (AI) companies have experienced market setbacks, Nscale is facing opposition from investors to its initial public offering (IPO) valuation goals. According to people familiar with the matter, the NVDA.US (NVDA.US) -backed data center developer has been seeking an IPO valuation of around $30 billion. However, some sources said that recently, a group of investors urged the company to consider a valuation range of 16 billion to 19 billion US dollars, believing that this valuation is more likely to be favored by buyers. One important factor is that Australian AI data center company Firmus's IPO plan declared bankruptcy.
Firmus, an Australian artificial intelligence (AI) data center operator supported by Nvidia, originally planned to go public at a valuation of around US$30 billion and is expected to become one of the largest IPOs in Australia. However, due to overvaluation, insufficient investor subscription demand, and market concerns about huge financing needs for AI infrastructure, this much-publicized listing plan was finally cancelled on October 9.
According to people familiar with the matter, Firmus and his underwriting team originally wanted to attract a large number of US institutional investors to participate in the subscription, but during the promotion process, many US fund managers believed that the $30 billion valuation sought by the company was too expensive. As subscription demand fell short of expectations, the underwriting team once considered reducing the distribution scale and lowering the valuation to salvage the deal. According to reports, the relevant plan includes reducing the financing scale to about 3 billion US dollars and lowering the company's valuation to between 20 billion and 25 billion US dollars. However, even after the conditions were adjusted, the underwriting team was unable to secure sufficient support from US investors and eventually had to cancel the IPO.
Nscale publicly submitted an application for listing in the US on September 18. Although the required 15-day waiting period has passed, the company has yet to begin an official market launch. People familiar with the matter said that the company is currently processing comments from the US Securities and Exchange Commission (SEC) on its filing documents and plans to launch a market promotion once these issues are resolved. People familiar with the matter also said that discussions on the IPO are still ongoing, the details of the IPO plan may change, and no final decision has yet been made.
Nscale is developing data centers in places such as Norway and West Virginia in the US. It was reported in August that the company is expected to raise up to $3 billion in the IPO. The Norwegian data center, located north of the Arctic Circle, is known as the British data center developer's flagship project, but reports say that the construction progress of the project is six months behind schedule due to cooling system leaks, local regulations, construction delays, and a fire.
The London-based company just completed a pre-IPO round of $3.36 billion last month, led by Dan Loeb's Third Point. Participating institutions also include Nvidia, Apollo Global Management (APO.US), Citadel, Hudson Bay Capital, and the Abu Dhabi Investment Commission.
However, as borrowing costs rise and market uncertainty about the long-term returns of huge AI investments intensifies, investors' sentiment towards AI infrastructure companies, including chip makers and cloud computing companies, has changed. The stock prices of many of Nscale's peers have recently been hit hard. CoreWeave (CRWV.US)'s market capitalization evaporated by a quarter last week, and its credit risk index rose to an all-time high; Nebius (NBIS.US) shares fell 32% in the past two weeks.
The difference in expectations between companies seeking an IPO and potential investors may force companies to slow down the listing process. The so-called “valuation gap” may reflect differences of opinion between the two sides on the future trend of financing costs and whether the challenges facing the entire industry can be quickly addressed.
The differences in valuation will further increase the challenges facing NScale's proposed IPO in the near future. Microsoft (MSFT.US), one of Nscale's biggest customers, said on Sunday that it has pulled out of a UK data center deal with Nscale after related data center projects faced delays due to power supply restrictions.