(Dec 13): Shares of data centre operator DigiCo Infrastructure REIT fell in their A$2 billion (RM5.64 billion) debut in Sydney on Friday, with market watchers citing valuation concerns.
The stock tumbled 9% following Australia’s biggest initial public offering (IPO) in more than six years. After flipping between gains and losses for much of the session, it closed at A$4.55, below its initial offer price of A$5.
The IPO values the firm’s data centre portfolio up to 70% higher than Australian peers, Bloomberg Intelligence analysts led by Jack Baxter wrote in a note. Despite the growing appetite for data centres, Morningstar Inc said ahead of the debut that DigiCo REIT’s shares were overpriced. It valued them at A$3.40 apiece, a 32% discount to the offer price.
The company is seeking to capitalise on the surge in investor interest in the sector, with a slate of firms seeking cash to expand their data centre portfolios on the back of the artificial intelligence (AI) boom. Global demand for such infrastructure is expected to rise at an annual rate of 19% to 22% from 2023 to 2030, according to a recent McKinsey & Co report.
DigiCo is expected to have a total portfolio of 13 properties in Australian and North American markets. It currently holds three properties, according to its prospectus.
“There are many questions about its underlying assets, so investors that got in were mainly looking for a quick profit,” Jun Bei Liu, portfolio manager at Tribeca Investment Partners, said of the debut.
The deal — Australia’s largest since oil refiner Viva Energy Group Ltd’s listing in July 2018 — has helped boost the nation’s overall IPO proceeds for this year to US$2.4 billion, more than the amount raised in 2022 and 2023 combined, according to data compiled by Bloomberg.
Before DigiCo’s listing, IPOs in Australia have on average generated a roughly 11% gain on their first day of trading this year, according to data compiled by Bloomberg. Listings in the country that performed poorly on their debut and in their first week tend to trade with worse liquidity afterward, according to an Aequitas Research Pvt note published before the listing.
Australia’s IPO market has historically been shallow compared to its regional peers, said Sumeet Singh, Aequitas’s head of equity research. “There wasn’t anything else immediately lined up for listing after this, so it shouldn’t have much impact,” Singh said of the aftermath of DigiCo’s trading performance.
The offering also comes on the heels of a massive data centre transaction in Australia this year. Blackstone Inc and the Canada Pension Plan Investment Board agreed in September to acquire AirTrunk in a deal valuing the company at A$24 billion. That was Blackstone’s largest-ever investment in the Asia Pacific region.
Alternative asset manager HMC Capital Ltd, led by former UBS Group AG dealmaker David Di Pilla, launched the listing. The Sydney-based company will hold about an 18% stake in DigiCo REIT following the IPO. HMC shares fell 7.2%, the most in two years, after the debut. Australia’s benchmark S&P/ASX 200 Index shed 0.4%.
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