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Shares of data centre REIT Fermi fell sharply on Friday after a prospective tenant withdrew from an agreement to provide up to USD 150 million for the company’s Texas facility. Although talks on a possible lease continue, the cancellation has triggered investor concern, particularly as the newly listed firm has yet to generate revenue and remains in its early growth phase.
Shares of Fermi, the data centre-focused real estate investment trust co-founded by former U.S. Energy Secretary Rick Perry, dropped 34 per cent on Friday after the firm disclosed that a potential tenant had terminated a funding agreement linked to its Project Matador development in Texas. The reversal marks an early setback for the company, which listed on the Nasdaq in October at a valuation of USD 14.8 billion but has not yet begun generating revenue. Advertisement
The customer, whose identity has not been disclosed, had signed a deal that would have allowed it to lease part of the Texas site and contribute as much as USD 150 million towards construction costs. While discussions regarding a lease arrangement are continuing, the financial commitment has been withdrawn entirely, prompting a sharp market reaction.
Analysts observed that younger companies with limited client bases often face heightened vulnerability when a key prospective partner pulls out. Brian Jacobsen, chief economist at Annex Wealth Management, said the development highlights the “key client risk” associated with firms still building their commercial pipeline, noting that the loss of a single customer can have an outsized impact during the early stages of business development.
Fermi had enjoyed strong investor interest during its initial public offering in October, buoyed by robust demand for infrastructure supporting artificial intelligence workloads. However, the latest setback arrives amid a more cautious investment environment for AI-linked companies, with some market participants questioning the durability of the sector’s recent momentum.
Michael Ashley Schulman, chief investment officer at Running Point Capital, said the company remains in a “show me” phase typical of young public firms. He added that the withdrawal of a potential USD 150 million tenant deal is likely to amplify investor concerns, particularly at a time when fears of overbuilding in the data centre industry are gaining traction.
By Friday’s close, Fermi’s shares were trading at USD 10.04 — nearly half their IPO price of USD 21 — making it one of the biggest decliners on the Nasdaq during the session.
Source - Reuters
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