(Oct 21): DayOne Data Centers Ltd is weighing options for its US initial public offering (IPO), including a potential delay or size cut, as volatility around data centres increases, according to people familiar with the matter.

While Singapore-based DayOne has been waiting for the right window to launch the IPO, it has also been considering the possibility of pushing back the share sale until the market recovers, the people said. Other options include going ahead with a smaller listing that may raise US$2.5 billion (RM10.2 billion) to US$3 billion, roughly half of what it had originally aimed for, the people said.

DayOne, whose backers include Coatue and Hillhouse, is continuing to engage with potential investors and still wants to move forward as soon as the market allows, the people said. The company was initially considering raising as much as US$5 billion from the listing as soon as the fourth quarter, people familiar with the matter said previously. It had been eyeing a valuation of about US$20 billion, the people have said.

“Given the recent market volatility, we think DayOne should downsize its capital raise to a smaller US$2.5 billion-US$3 billion deal, adjusting its underlying valuation to offer a more attractive ‘discount’ to ensure order book stability while keeping its multibillion-dollar construction pipeline funded,” said Stephen Yin, an analyst at Bloomberg Intelligence. 

Deliberations are ongoing and DayOne hasn’t made any final decisions, the people said, asking not to be identified because the information is private. The company could still opt to move ahead with the offering in the coming weeks, according to the people. DayOne declined to comment. 

While data centres have drawn global investor demand amid a boom in sectors related to artificial intelligence (AI), a more negative sentiment has started to have ripple effects on IPOs. DayOne has been raising billions of dollars in private funding rounds as it seeks capital to build out its pipeline. 

Australian data centre company Firmus Grid Ltd pulled its roughly US$5 billion IPO when investors balked at the valuation it sought, while AirTrunk, which also operates data centres, delayed a planned real estate investment trust IPO in Singapore to next year. 

South Korean digital infrastructure company Elice Inc plunged 32% in its Seoul trading debut on Tuesday. Coreweave Inc’s shares have more than halved since their May peak, and Nscale Ltd is facing pushback over its target IPO valuation, Bloomberg News has reported. On Wednesday, shares of Australian data centre operator Nextdc Ltd plummeted after it cut earnings guidance. 

Investors may prefer to buy into DayOne as it is a traditional data centre operator that generates “highly predictable cash flows” by leasing physical space under long-term contracts, according to Bloomberg Intelligence’s Yin. That contrasts with neoclouds like Firmus and Elice, which carry higher execution risks by renting out access to compute capacity based on graphics processing unit chips, he said. DayOne offers a “vastly superior growth and scale profile”, he said.

Some market participants are hoping that the recent volatility will pass after the US midterm elections on Nov 3. They are also looking ahead to the performance of Anthropic PBC’s upcoming listing as an important gauge of sentiment towards the AI sector.

DayOne filed for a US IPO earlier this month. The offering is being led by Morgan Stanley, JPMorgan Chase & Co, Bank of America Corp and Citigroup Inc. IFR reported on Monday that DayOne was gathering more investor feedback before launching the share sale.

DayOne is running or developing data centres in Singapore, Malaysia, Indonesia, Thailand, Hong Kong, Japan, Finland and Spain. Other backers include GDS Holdings Ltd, the SoftBank Vision Fund and Citadel’s Ken Griffin.

Uploaded by Tham Yek Lee