The momentum behind Firmus Technologies' high-flying valuation is showing severe cracks. Sources say the company is slashing its price to entice sceptical investors, with discussions underway to save what was billed as the largest IPO in Australia in decades.
On Thursday, Firmus abruptly withdrew from its scheduled appearance at a parliamentary inquiry into artificial intelligence amid the harried negotiations.
The alarm bells have centred on a near-$44bn valuation for a company still in its start-up phase. Just over a year ago, Firmus was worth less than $2bn, according to the value placed on it by Nvidia and others as they took equity stakes. Successive capital raising by many of the same core investors drove the valuation from $1.85bn to $15bn about eight weeks ago, then to almost $44bn days ago. But that figure is now being heavily unwound due to tepid support.
"The whole thing was getting fanciful," one investment manager briefed on the float said. "It's a business that's losing hundreds of millions of dollars, and yet its valuation kept going up nonstop every couple of months."
Firmus has raised money from Nvidia, Blackstone, Jane Street and Coatue. It aims to cash in on surging AI expenditure by building and operating liquid-cooled "AI factories" packed with Nvidia GPUs.
However, the company only has two small operational sites alongside seven contracted and four planned facilities. About 97% of contracted revenue sits on sites that aren't 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.
Firmus's high valuation relies on prompt construction of that unbuilt pipeline at a time when local communities in Australia and the US are rebelling against similar developments. While Firmus's focus on Asia avoids some backlash, it faces power constraints and construction delays.