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

In this week's Better Offline monologue, Ed Zitron talks about the brittle state of Australian AI data center company Firmus’ IPO, its dodgy underlying numbers, and how the Australian media has set an example of how you should actually cover an AI company. NOTE: This IPO was officially postponed shortly before going to press. The content still rocks. Newsletter: Credit Crunch: https://www.wheresyoured.at/credit-crunch/https://www.afr.com/technology/firmus-blockbuster-ipo-finds-itself-in-a-36-hour-spiral-of-doom-20261008-p613ul https://www.afr.com/markets/equity-markets/hedge-fund-uncovers-30-red-flags-against-firmus-20261008-p613t7 Save $10 off a year of my premium newsletter: https://edzitronswheresyouredatghostio.outpost.pub/public/promo-subscription/gzqwkv54e1 YOU CAN NOW BUY BETTER OFFLINE MERCH! Go to https://cottonbureau.com/people/better-offline and use code FREE99 for free shipping on orders of $99 or more. --- LINKS: https://www.tinyurl.com/betterofflinelinks Newsletter: https://www.wheresyoured.at/ Reddit: https://www.reddit.com/r/BetterOffline/ Discord: chat.wheresyoured.at https://discord.com/invite/QUUQUP9szv Ed's Socials: https://twitter.com/edzitron https://www.instagram.com/edzitron https://bsky.app/profile/edzitron.com https://www.threads.net/@edzitron Email Me: [email protected] mailto:[email protected] See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

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• 3:43Speaker 06

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

• 3:55Speaker 06

  Thousands of miles away in the strange world of Australia, a pale horse has emerged in the form of Fermus, 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, Fermus seemed like it would be another Australian CoreWeave, another vehicle to raise debt to buy Nvidia GPUs, backed by a $10 billion loan from Blackstone and Coitu, 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.

• 4:38Speaker 06

  Just any guesses? You know, put down some money? How likely do you think that was? Do you think it happened? Do you think it did? Anyway. Fermus has every backing that you'd expect from a dodgy data center company, funding from Nvidia, Jane Street, and Blackstone, all of whom also back CoreWeave 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

• 5:20Speaker 06

  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 from when this company was meant to go public. Not a great sign. It's unclear who else Fermus 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,

• 6:01Speaker 06

  citing that Fermus may have a compelling story, but not a compelling valuation. And for those of you at home who've been playing, is that good? That is not good. Per the Australian Financial Review, Fermus 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, who's 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.

• 6:46Speaker 06

  Fermus is a fucking stinker. 90% of its revenue backlog comes from two customers, Meta, 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 Fermus stories, and I 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 Fermus. As mentioned at the jump, Fermus has a whole $50 million in revenue, annually speaking,

• 7:28Speaker 06

  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 it. Every promise underlying Fermus's 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 Fermus based on its EBITDA multiple, 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 Fermus lists at all, or if it does, how much it'll actually list for. The Australian financial media has been beating the absolute shit out of it for months

• 8:12Speaker 06

  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 pushback against CoreWeave, Nebius, Iron, or any of the other dogshit merchants raising billions to maybe build a data center someday? No, no, no, no, we absolutely couldn't here in America. It'd be considered uncouth to point out their financial fragility.

• 8:56Speaker 06

  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.

• 9:05Speaker 06

  Fermus is set to go public in the next few weeks on October 23rd, but the rumblings are that it might not even make it out the door. And if it does, it'll be at a vast discount. It's a sign that investors have finally started to see the AI bubble for what it is. A bunch of grifters trying to dump questionably valued assets onto an unsuspecting public under the auspices of innovation, kind of gussied up by the press. I'll also add that basically every single problem and criticism that people have with Fermus, revenue concentration, questionable delivery timelines, unbelievable debt load today and in the future, can be levied against every single American AI data center company without exception. And that the only real difference is that some of those data center companies

• 9:49Speaker 06

  already had some, but not much, capacity built as a result of their cryptocurrency mining operations. Core Wave was smart to go public in 2025. And I think Lambda, another Nvidia-backed NeoCloud playing to do so in 2027, is going to have a few more problems. The Australian coverage of Fermus should be an embarrassment to the American finance and tech press because it shows what actual journalism looks like. As I read this sentence, I see a headline from Bloomberg about Core Wave signing a deal with Adani Connects. You know, that guy who was under massive fraud allegations. But they've all gone away, thank you, our president, in India for 240 megawatts of capacity that won't come online until the middle of 2028, which is functionally identical to the promises made by Fermus.

• 10:32Speaker 06

  Except, instead of saying that, the article chooses instead to talk about how Core Wave has, and I quote, "been expanding geographically in order to boost available capacity and better serve global customers." When all of this shit finally collapses, something has to fundamentally change about how the business and tech press does its fucking job. The amount of times a NeoCloud or AI company has managed to get a glossy piece about some theoretical project as a means of raising more debt or venture investment off the back of press unquestionably repeating their marketing collateral is actively dangerous for investors and the general public. It is very, very, very easy to see the problems in this industry, but I guess it's much harder to do so if you're intentionally choosing to ignore them. Fermus is as bad as Core Wave was and is as bad as Lambda.

• 11:17Speaker 06

  Perhaps they have a little bit more infrastructure, but their problems are identical. And I know that there are journalists who are listening to this who might be a little bit butthurt. But it's not my fucking problem or my fucking fault that nobody seems to be able to criticize these companies. I challenge you, if you feel like your feelings are hurt, to go and read the coverage of Fermus, if you cover AI data centers, and see what the difference is between the American coverage and the Australian coverage. Because it's distinct. And had anyone bothered to take Core Wave or Iron or Nebius or Lambda or any of the American ones seriously, like the Australians have with Fermus, maybe we wouldn't be in this situation we're in today. And maybe the future stock crash that happens, which fucks every investor,

• 12:02Speaker 06

  retail and otherwise, that is connected to a NeoCloud, maybe we could have avoided that. We can't now. So thankfully, it looks like Australian investors won't get harmed as much as American ones. But when it comes down to the point, when this stuff falls apart, when it comes to the point when people get hurt, people are going to ask who to blame and the answer is partially the media. And if you remember the media hearing this, maybe it's not about you. Maybe you did your job. Maybe you were critical. Or were you? Go and check your work. Go and check whether you actually criticized and actually scrutinized and were an actual skeptic of these companies or whether you spent far more effort scrutinizing the scrutinizers.

• 12:46Speaker 06

  Because that's how we get bubbles. That's how hype cycles grow. And that's how regular people get fucked. Fucked as retail investors or those who are having their insurance funds put into these companies. And guess what? Guess fucking what? You know who actually backed Fermus? Blackstone's credit and insurance fund. So when this dog dies, and it will, it will be directly as a result of nobody really pointing that out and allowing and actually greenlighting and approving and celebrating companies like Blackstone sinking pension funds and insurance funds into these dodgy goddamn companies. All of this could have been avoided and my anger that you hear in my voice

• 13:28Speaker 06

  is because I've been saying it for years. And I hope something changes as a result of this. I will be calling for change. Been taking detailed notes. Oh, how I have. And I will of course be back next week with a great episode on Borns. And of course, another monologue. It's always a pleasure to serve you. Thanks as ever for listening. I love you all.

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