DigiCo debacle as stock slides further in second ASX session

Data centre operator DigiCo has extended declines in just its second session on the Australian Securities Exchange after marking the country’s biggest initial public offering in over six years.

After a record-breaking $2 billion IPO, the stock fell as low as $4.06 on Monday morning before recovering slightly to close at $4.30.

It means the stock has suffered a 14 per cent decline on its $5 listing price, highlighting investor caution amid DigiCo’s ambitious growth strategy.

There are reports the stock has been labelled “DodgyCo” by multiple institutions.

The HMC-backed DigiCo is hoping to capitalise on the growing demand for artificial intelligence-driven data centres but faces scepticism, with investment research firm Morningstar deeming the stock as overpriced.

Morningstar valued the stock at $3.40 per share, a 32 per cent discount to the $5 offer price.

The “vendors are asking investors to stump up too much,” it said earlier this month.

Bell Potter on Monday told investors DigiCo was now trading on a comparable level to rival data centre player NextDC.

The deal marked the biggest ASX float since petrol station owner Viva Energy’s $2.65b listing in July 2018.

Shares in David Di Pilla’s asset manager HMC Capital, which holds a 32 per cent stake in DigiCo, also closed down 13.7 per cent to $9.73 on Monday.

DigiCo said it would use part of the IPO proceeds to buy two large-scale adjoining data centre sites near Sydney, where the company is based, with a contracted capacity of 20 megawatts.

It expects to have a total of 13 properties in Australia and North America. DigiCo was given a harsh reception by investors on Friday, with shares closing down 9 per cent at $4.55 on its ASX debut.

DigiCo’s lucklustre start to life on the ASX will be deemed another miss on Australia’s IPO market as as higher interest rates, inflationary pressures and weak commodity prices dent investor appetite.

Just 13 businesses listed on the ASX in the first half of this year.

According to recent data compiled by Bloomberg, DigiCo boosted Australia’s overall IPO proceeds for this year to $3.8b, more than the amount raised in 2022 and 2023 combined.