DigiCo on skid row as investors ignore AI hype to dump shares

HMC Capital founder David Di Pilla’s dreams of a global data centre empire appear to have been shattered as investors dub the company ‘DodgyCo’.

Concerns have been raised in federal parliament about security of Defence Department secrets held by Chinese-owned data centre Global Switch

Shares in data centre owner DigiCo Infrastructure REIT plunged almost 20 per cent from their listing price in a dramaticsecond day of trade, which has seen about $350m wiped off the stock since it hit the Australian Securities Exchange.

The company’s shares touched a low of $4.02 on Monday morning, with the dramatic pre-Christmas sell-off coming as investorsdesert the heavily structured real estate investment trust and many institutions avoid the stock. DigiCo shares came backslightly but the low showed a near-20 per cent loss on their listing price.

They finished 25c lower at $4.30, so have slidby about 13 per cent on listing.

The Australian has been told multiple institutions have dubbed the stock “DodgyCo” in the market and they are unwilling to back the vehicle’s after market trading, partly due to the HMC Capital-managed trust’s excessive fees. Many were also scaled back or cut out of the float and have little incentive to support it now.

The failure of the heavily-promoted float, which was managed by four top investment banks and a series of smaller retail brokers, has put the fund’s manager under pressure and also cast a shadow over its other listed trusts, with others also sliding.

It is also a hit to the IPO market going into next year, particularly for interest rate-sensitive funds or those depending on hype to raise retail money, with the gloss of the AI revolution failing to provide support for DigiCo.

Investors told The Australian the heavy fees associated with the fund made it essentially un-investable for many active funds managers, despite the fact its size meant it could be included in major indices as early as March.

David Di Pilla, the richlister behind fund manager HMC Capital, which has just listed data centre owner DigiCo Infrastructure REIT on the ASX. Picture: John Feder

But, many retail investors appear unwilling to wait to recover their initial losses. With their hopes of getting a quick stag profit from the float souring they are now dumping the stock.

The share price plunge has seen the biggest float this year dramatically lose retail investor support and will be hard to recover without institutional buyers coming in to support it.

But many have questioned both the earnings multiple at which the stock was listed and the use of financial engineering to bolster returns to investors.

Their revolt against the hefty fees for buying and listing the data centres, which came in at $182m, has also led to sell off in the head stock, HMC Capital, closed down $1.54 to $9.73, after also being sold down on Friday.

On Friday, the DigiCo stock started with a market capitalisation of $2.75bn after being billed as the marquee float of the year. But, it was given a harsh reception by investors, with its shares down by as much as 10 per cent on its ASX debut.

The much-hyped stock was sold off heavily ahead of the market close, raising questions about how the vehicle which owns $4.2bn of data centres in Australia and the US would bounce back.

The fall from its $5 issue price to a Friday close of $4.55 surprised investors as the REIT was heavily promoted as having a tight register packed with HMC’s “friends and family” and retail investors who bought into the data centre theme.

One of the float brokers, Bell Potter, told clients on Monday that DigiCo is now trading on a comparable level to rival data centre company NextDC and said that it looked like institutions were stepping in during afternoon trade.

Broker Angus Aitken told clients that HMC Capital remained a great long term business and DigiCo had not at all changed and questioned where the selling pressure had arisen. “Whilst everyone blames retail brokers for selling, actually it is the big end of town selling at a loss,” he said.