NextDC raising underlines data centre demand; CVC plans float

There is strong demand from investors to gain exposure to data centres on the listed market.

Two interesting aspects of the NextDC equity raising have emerged. First, its share price is above the $15.40 issue price, which typically suggests that there is more demand than the supply of shares.

The share price closed at $15.88 when it resumed trade, down 4.97 per cent. The raise price was at a 6.8 per cent discount to NextDC’s previous trading price before halted.

Second, there was a 99 per cent take up by investors, which is unusual on non-renounceable deals, as was the structure with the NextDC deal.

In a renounceable rights issue, a shareholder can be compensated for not taking up their rights, because their stake will be smaller after a raising.

With a non-renounceable offer, this is not the case, a fact that motivates shareholders to take part in equity raisings so their holding will not be diluted.

The situation is evidence of the strong demand from investors to gain exposure to data centres on the listed market, with NextDC, Goodman Group and Global Data Investment Fund providing the only opportunities.

Analysts say the deal is a special case and doesn’t necessarily suggest it’s a great time for companies to raise capital more broadly on the ASX.

As earlier reported by DataRoom, all the money is going into development, with it barely able to keep up with growing demand on the back of artificial intelligence needs.

Elsewhere, The Wall Street Journal reports that private equity firm CVC plans to float at a $US16bn value.

Time will tell whether this means it will become more deal hungry to fund earnings growth, although deal makers will be hoping it becomes more committed to big acquisitions in the local market after looking at Brambles, Greencross and APM, but then moving on.