Monologue: Australia's Dodgiest AI IPO Is A Pale Horse

Ed Zitron (0:01)

Causo Media Hello, and welcome to this week's Better Offline monologue. I'm your host, Ed Zitron.

Thousands of miles away in the strange world of Australia, a pale horse has emerged in the form of Firmus, an Nvidia-backed AI data center company with a whole $50 million in revenue that is, or perhaps was, trying to raise about $5.5 billion in its IPO, which would have been, I think, the second largest in the history of the country. At first, Firmus seemed like it would be another Australian core weave, another vehicle to raise debt to buy Nvidia GPUs, backed by a $10 billion loan from Blackstone and Koachoo, and a plan with the data center magnet called CDC to build $73 billion worth of capacity in what was once called Project Southgate, with plans to build the country's largest data center by April of this year.

Just any guesses, you know, put down some money. How likely do you think that was? Do you think it happened? You think it did? Anyway. Firmus has every backer that you'd expect from a dodgy data center company, funding from Nvidia, Jane Street, and Blackstone, all of whom also back core weave and multiple other AI data center projects, and an initial commitment from Meta to artificially boost its potential earnings by saying, yes, once you build one of these data centers, which you have never done before, by the way, we'll absolutely pay you for it. Under the direct assumption that very little will get done for many, many years, and I will say the correct one too.

It's unclear what happened to the data centers, other than the fact they haven't been built, but you've probably worked out by now why I keep referring to Project Southgate in the past tense, as CDC pulled out of the project a few days ago with around 2.5% of the capacity built, and that's less than a month when this company was meant to go public. Not a great sign. It's unclear who else Firmus will build with, but it's got bigger problems to deal with. You see, its initial IPO valuation was meant to be around $50 billion. Australian, I'm just saying dollars, just get over it. Except when banks started offering shares, it priced around $11 a piece, or a valuation of $43.7 billion, followed by Australian pension fund Unisuper, saying that, and I quote, it all comes down to valuation, and that it will not have any meaningful exposure, citing that it, that Firmus may have a compelling story, but not a compelling valuation. And for those of you at home who have been playing, is that good? That is not good. Early Australian Financial Review, Firmus has initially claimed in its original term sheet that it had indicative orders that priced above $11 a share, only for the pricing of the IPO to be cut to $8.25 a share, with the AFR now reporting that the company may end up taking anywhere between $6 and $7 a piece to get the thing out the door. As noted by Hedge Fund CEO, CEO of Plato, David Allen speaking to the AFR, if the IPO was so well covered at $11 a share, why was it cut? Well, I think the answer is obvious. Firmus is a fucking stinker. 90% of its revenue backlog comes from two customers, Metta as mentioned, and an unnamed major global technology company. As well as, though this wasn't in the prospectus, a multi-year deal to provide compute to OpenAI out of data centers in Malaysia that do not exist, and let's be honest, will never exist. Indeed, I don't know why nobody pointed at that within these stories. I've read a lot of Firmus stories and haven't really found much discussion of that. It's almost like everyone just kind of assumes that that was a bit, I think it's a joke, a little funny one, except a multi-billion-dollar joke, you know, much like Firmus. As mentioned at the jump, Firmus has a whole 50 million dollars in revenue annually speaking, but plans to build 10 gigawatts of capacity in the next five years, costing it hundreds of billions of dollars that it just doesn't have and nobody's going to give him. Every promise underlying Firmus' valuation comes down to, to paraphrase Plato's David Allen, flaws the execution of some of the most ambitious infrastructure projects in history, and as Allen noted, valuing Firmus based on its a bit demultiple, as in working out how valuable it is based on the cash that it might bring in, is kind of like valuing an airline based on planes being free and lasting forever.

In any case, as I read this, it's unclear whether Firmus lists at all, or if it does, how much it will actually list for. The Australian financial media has been beating the absolute shit out of it for months in a way that should embarrass the vast majority of journalists that have covered data centers in America and England, pushing back against basically every ridiculous claim and talking to skeptic after skeptic, mocking the company for its dodgy metrics and scrutinizing the banks backing it. A great example is Mark DiStefano of the AFR, who made the point yesterday morning that banks had, as mentioned, said the IPO was effectively filed at $44 billion, despite the fact that it was anything but, and that there'd be potential regulatory problems as a result. Can you imagine any of this kind of push back against Corweave, Nebius, Iron, or any of the other dogshit merchants raising billions to maybe build a datacenter someday? No, no, no, no, we absolutely couldn't here in America. It'd be considered uncouth to point out their financial fragility. In fact, if anything, we should help pump these stocks so they can raise more money to send to our glorious god, Mr. Jensen Huang.