Firmus IPO falls apart & the invisible crash behind Wall Street's record highs

Ren (0:00)

Firmus is a data center operator that was going to list in Australia.

Bryce (0:05)

So their IPO has been pulled. They were targeting the second largest IPO in Australian history.

Ren (0:11)

I think you said, don't invest.

Bryce (0:13)

Absolutely. And now you can't.

Ren (0:15)

Now you can't. From their all time highs, 85% of the S&P 500 stocks are down 10% or more.

Bryce (0:24)

Yet the index is still up 14%.

Ren (0:27)

Under the surface, things aren't as they appear. And there's a bit of an invisible crash happening.

Bryce (0:37)

Welcome to another episode of Equity Mates, a show where we explore what's possible in the world of investing. If you've just joined us for the very first time, a huge welcome to our community. My name is Bryce.

Ren (0:47)

And I'm Ren. And today we're talking about Firmus pulling its IPO, the US market hitting all time highs, but the trouble that's brewing under the surface. But Bryce, we should acknowledge where we're recording for people watching on video.

Bryce (1:00)

Yes, we are in the depths of Manhattan at our hotel.

Ren (1:04)

You've got a construction site behind you.

Bryce (1:06)

Very New York, very New York. It's a beautiful day.

Ren (1:09)

Hopefully not too loud. But yes, this is the end of our New York trip. We successfully interviewed Bill Ackman. We stuck around for another couple of interviews. Today we've been unpacking the world of robotics.

Bryce (1:20)

Yeah, it's been fascinating. I actually can't stop thinking about it. The world that we are going to experience over the next three to five years for humanoids, the next 15 plus for the takeover of robotics is crazy. Yeah. The world we live in is just going to be so different.

Ren (1:38)

Yeah. The thing that stood out for me, the expert we were speaking to said about half of the world's labor, like half the world's work is knowledge work, which is facing disruption from AI. Then the other half is physical work.

His big investment thesis is, the vast majority of that is going to be disrupted in the next 15 years.

Bryce (1:58)

He thinks we're going to have billions of robots.

Ren (2:00)

Yeah. Obviously, he thinks that, but some of the stories like, what is it? Figure AI, the company where the robots literally walk themselves off the production line?

Bryce (2:10)

Yeah. Nuts. Name badges communicating with each other as if they are employees.

Ren (2:16)

It's wild. Anyway, that whole episode will be out soon. If you've just come across Equity Mates for the first time, make sure you're watching or not watching. Make sure you're subscribing wherever you're watching or listening. But let's get into it because there's a heap going on in markets.

Bryce (2:29)

So much going. We're going to start with Firmus. We spoke about it a couple of episodes ago, but the headlines kept moving.

Ren (2:35)

I think you said, don't invest.

Bryce (2:37)

Absolutely.

Ren (2:38)

And now you can't.

Bryce (2:42)

So their IPO has been pulled. They were targeting the second largest IPO in Australian history based on the amount that they were raising.

Ren (2:51)

If people are new to investing and new to Equity Mates, Firmus is a data center operator that was going to list in Australia.

Bryce (2:59)

And there was a lot of hype around it. They were targeting a $44 billion valuation. The bank started shopping that around to potential investors at $11 a share.

Ren (3:08)

Which would have made them about the 15th most valuable company in Australia, about as valuable as Woolworths or as valuable as Coles and Cochlear put together.

Bryce (3:18)

Yeah, nuts, just nuts. For a company that only had a few tens of millions in revenue, it was crazy. But then it turned very quickly. The banks, from what we've seen reported, started dropping the share price.

Because demand wasn't quite what they thought it was. So much so that the AFR reported they dropped it as low as $6 a share before pulling it entirely. I think they were expecting these big US backers to come in. They were telling their investor base as well that they were oversubscribed. There was too much demand, but that wasn't to be true.

Ren (3:51)

It wasn't just Firmus saying it. It was also Firmus' bankers. And I reckon there's going to be a bit of scrutiny on some of these brokers and bankers. The AFR, they got an email that Morgan sent out to its clients that said demand was, quote, enormous, north of $7.5 billion for a $5 billion of available stock.

Obviously not true.