OpenAI’s listing delay raises stakes for SoftBank’s $50bn data centre IPO

{"text":[[{"start":12.12,"text":"Growing uncertainty about when OpenAI will go public is heaping pressure on SoftBank’s looming listing of its US data centre developer — which has yet to bring a single facility online."}],[{"start":22.56,"text":"SB Energy is the Japanese investment group’s bet that soaring demand for AI will drive a sustained boom in data centres and is part of SoftBank founder Masayoshi Son’s sweeping vision of the technology’s future."}],[{"start":35.8,"text":"The listing, which could happen in the coming weeks at a target valuation around $50bn, is set to test investor willingness to keep backing Son’s bet as he tightens his entanglement with the two companies at the heart of AI. Both OpenAI and chipmaker Nvidia will own significant stakes in a listed SB Energy."}],[{"start":54.72,"text":"OpenAI has delayed its own IPO and is in early talks for a private funding round that could value it at $1.2tn. The moves added uncertainty to SoftBank, which has committed more than $60bn to the ChatGPT maker, as it sought to bankroll Son’s desire to spend heavily on new AI ventures next year, said people familiar with the matter."}],[{"start":75.56,"text":"OpenAI’s valuation has a significant effect on SoftBank’s own value and balance sheet. While much smaller in scale, a successful listing of SB Energy would also lift SoftBank’s net asset value, giving Son greater capacity to raise funds from banks and markets."}],[{"start":90.56,"text":"“This is very much the SoftBank ‘circle of life’,” said David Gibson, an analyst at MST Financial, adding that it would make the company even more financially exposed to OpenAI and help Son “fund more debt and investments”."}],[{"start":103.6,"text":"SB Energy’s aim is to build data centres, connect them to electricity grids and in some cases provide power. Yet its history since being founded in 2019 as a renewable energy group has been complicated."}],[{"start":115.88,"text":"It has a backlog of contracts worth $439bn in future revenue, with the vast majority related to 8.8 gigawatts of data centre capacity, with an average lease length of more than 19 years. Among groups developing computing power for third-party customers, only CoreWeave — a cryptocurrency miner-turned-cloud computing provider — has anything close to that, with more than $100bn in contracts."}],[{"start":141.72,"text":"However, SB Energy has no data centres in operation, helping explain why $357bn of the future contracted revenue is only “expected to be recognised” from 2034 onwards."}],[{"start":154.68,"text":"The group’s main development will be a campus in Ohio that is expected to deliver 8GW of new capacity by 2032. For comparison, Meta’s largest data centre in Louisiana is being expanded to 5GW of capacity."}],[{"start":168.72,"text":"Nvidia has agreed to provide a guarantee of $105bn for the Ohio project’s initial phase. OpenAI will be the tenant on the campus, as well as on an SB Energy site in Texas. SoftBank itself is a customer of a separate planned site in Texas."}],[{"start":null,"text":"

"}],[{"start":183.84,"text":"SB Energy has acknowledged the potential perils of its dependence on its interlinked main backers, particularly its exposure to any shifts in OpenAI’s strategy."}],[{"start":193.86,"text":"“Our near-term revenues, project-level financing arrangements and development plans are significantly linked to OpenAI’s continued performance under our lease and related agreements,” it said in its IPO prospectus."}],[{"start":206.24,"text":"Recent concerns about the threat posed by AI have prompted renewed calls for a slowdown or pause in development. Senior figures at OpenAI said they would continue spending on chips and infrastructure, even if they moderated AI development, but any slowdown would have an outsized impact on the data centre company."}],[{"start":222.84,"text":"In contrast with its ambitious target, SB Energy had revenues of just $138.7mn in the first six months of this year, mostly from its existing solar business, and posted an operating loss of $551.6mn."}],[{"start":237.7,"text":"There are also big questions about the amount of cash that SB Energy will have to find in addition to the IPO, which is reportedly aiming to raise $5bn to $7bn while SoftBank will maintain a majority stake."}],[{"start":250.2,"text":"SB Energy has said it will need to fund more than $170bn in capital expenditure if it is to actually build the contracted data centres and start collecting rent."}],[{"start":259.12,"text":"People briefed on SB Energy’s strategy said the company intended to keep its equity share in those projects at roughly 10 per cent, within the range SoftBank tends to use for project financing."}],[{"start":271.12,"text":"That means the company will need to raise another $7bn or so on top of the IPO and other existing contributions to pay for its capex, according to Gibson’s estimates."}],[{"start":281.44,"text":"However, the people familiar with SB Energy said it could defray much of that need with cash generated when projects were operational. SoftBank and SB Energy are confident they can find willing investors in the future, the people added, both for any equity needed and the debt to finance the projects."}],[{"start":299.8,"text":"Uncertainty around the financing of projects is a major reason why investors are struggling to value the company. Some investors said a $50bn valuation might be tough to hit, while Gibson added it “looks rich given the concentration” of SB Energy’s customer base."}],[{"start":315.52,"text":"“There is not enough information available to make the maths work,” said a SoftBank investor."}],[{"start":321.72,"text":"However, SoftBank is becoming more confident about hitting its target. People familiar with the company said bankers, on average, saw $50bn as a reasonable valuation."}],[{"start":333.04,"text":"SoftBank and SB Energy declined to comment."}],[{"start":335.88,"text":"CoreWeave, which reinvented itself for the AI boom, was similarly beset by doubts about inexperience and customer concentration ahead of its IPO in March last year. The company’s market capitalisation has since more than doubled to nearly $50bn, amid relentless demand for computing power."}],[{"start":354.28,"text":"More optimistic investors also trust Son’s ability to defy negative predictions, having seen him bring companies such as chip designer Arm to market, and believe he can squeeze more out of the ecosystem it is building."}],[{"start":365.6,"text":"This IPO was “another gamble on Masa”, said a longtime SoftBank investor, referring to Son. “You have to remember that he has always been successful in the face of cynicism.”"}],[{"start":382.2,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1789719849_5791.mp3"}