Data Centre-as-a-Service provider NEXTDC (NXT) is raising more capital. This follows a $1.32 billion capital raise in April.
The trigger for this raise was the clamour from investors to own data centre infrastructure as the artificial intelligence (AI) boom takes off. This was evidenced by the sale of data centre provider AirTrunk for $24 billion to a consortium led by US private equity giant Blackstone and the Canada Pension Plan Investment Board. The price tag was more than double the “around $12 billion” expected less than eight months earlier, and eight times the valuation of $3 billion when Macquarie Infrastructure invested in AirTrunk four years earlier.
The AI boom is driving demand for data centre space that can accommodate the power hungry servers that AI uses. This involves high density set-ups where each rack needs up to 50kW of power. They also need advanced networking because AI tasks rely on parallel processing which requires strong cabling and infrastructure within and between racks. Cooling is also an issue.
Built to spec, modern, top tier data centres close to major customers are in huge demand.
So, NEXTDC is raising capital to accelerate the development of new data centres. Details of how this money will be spent are sketchy, but in broad terms, it will be spent on the acquisition of new development sites in Asia. NEXTDC currently has sites in Kuala Lumpur and Auckland in development, in planning in Tokyo, and is evaluating sites in Bangkok, Johor (Malaysia), Singapore and a second site in Tokyo.

In April, it outlined plans to accelerate the development of sites in Sydney and Melbourne, and for land acquisition opportunities in Asia.
This capital raising is up to $750 million. It comprises two parts. An institutional placement of $550 million (already completed) and a share purchase plan (SPP) capped at $200 million for retail investors.
The institutional placement was extremely well supported, with the new shares issued at a tiny discount to the market price. The placement price of $17.15 represented a 3.9% discount to the ASX closing price prior to the day of the announcement, and just a 1.8% discount to the 5-day average trading price for NXT shares.
Retail investors won’t pay any higher than the institutional placement price of $17.15 per share. In fact, they will pay the lower of $17.15 and the average ASX trading price over the 5 days leading up to the close of the SPP, less a 2.5% discount. So, if for example, the average trading price for NXT over the 5 days to 4 October is (say) $17.30, retail investors will only pay $16.86 per new share.
The share purchase plan is capped at $30,000 per applicant. Applications can be made from a minimum of $1,000, and then in multiples of $1,000, up to a maximum of $30,000. The offer closes on Friday 4 October.
$200 million has been set aside for the SPP. If applications exceed this amount, a scale back is likely.
What do the brokers say?
The brokers are bullish on NEXTDC (from a valuation perspective). Each of the major brokers has a “buy” recommendation. According to FN Arena, the consensus target price is $19.98. The range is a low $19.40 from UBS through to a high of $21.20 from Macquarie.

NEXTDC (NXT) – last 5 years

Source: nabtrade
What’s the bottom line?
NEXTDC confirmed previously announced guidance for financial year 2025:
- Net revenue in the range of A$340 million to A$350 million (unchanged).
- Underlying EBITDA in the range of A$210 million to A$220 million (unchanged).
- Capex in the range of A$1,300 million to A$1,500 million (up $400 million due to site acquisition of S7 data centre in Sydney.
What do I think?
I think you take the lead from the institutional investors who strongly supported the offer. Buy up to $30,000 in the share purchase plan. The one downside is that because NEXTDC has issued so many shares recently, there is likely to be stock in lose hands. This could cap any rally in the short term as “traders” take profits. In fact, that is exactly what has happened since the institutional placement …it has only traded above the issue price for a couple of days. But over the medium term, if NEXTDC can execute on its strategy, there is considerable upside potential for this stock. The AI/data megatrends make NEXTDC a buy.
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