Michael Frazis

Michael Frazis wrote an excellent apercu re the problems/risks w/ Firmus (as a business as much as a stock). You should all read it: fraziscapitalpartners.com/an… I will try to add my perspective. I have no prob w/ ppl getting rich, or capitalizing on innovation. Prob here is this deal seems so clearly destined to blow up, a ton of retail baggies will inevitably get destroyed. Prob is the biz model (as Frazis outlines) demands a YUUGE amount of follow on PRIMARY capital over next 1-2yrs (and longer). They are raising $5bn USD now but will require maybe 7-10x that, over next 1-2yrs, to fulfill their nos. Even if generously 70% of this is debt funded (good luck!) you're looking at (by Aussie standards) insane capital demands - inelastic to price - over next 18months. Maybe 3-4x the IPO in terms of size. This is typically a v bad sign in IPOs. To that you must add SECONDARY supply - ie all the $$ made on the way up that unlocks 6mos, then 12mos, then 2yrs later, etc. Given Firmus was worth low single digit billions a year ago, and ~$15bn a few months ago (!), literally everyone is deep, deep, deep in the money even at say IPO price minus 50% (call it a $20bn valn). So you have 1) insane need for ongoing capital; 2) wall of secondary supply; and 3) optics. This is where it gets interesting. Firmus says their closest comp is Coreweave $CRWV, a firm that has never generated a profit; has 10x Firmus' revenue and scale (50 datacenters operational); and trades at 8x revs. Crucially, on like-for-like basis - ie when it was considerably smaller on revenue - it still traded at a fraction of the implied Firmus multiple (1000x revs at IPO price). This seems insane to me. Why would any US punters buy Firmus over the incumbents on this relative valuation? But Firmus is already spruiking an eventual US listing (even tho impossible while Curtis involved, imo). They have to - again bec of the capital needs, they are so hungry for capital - but it would inevitably be at whatever price the market would bear (ie, lower vs other listed US comps). Obviously, insiders know all this. This is why they are making it hellishly difficult to get access to the prospectus (I still havent seen it in the flesh); and why they are trying to spruik it so hard by bringing in as many brokers as possible (and offering all the follow-on offerings that will inevitably come, in the near future, to the willing sycophantic bankers). Again - nothing personal against those involved. It may even work out (for a while, at least). But personally I expect Firmus stock to be down >50% vs $44bn IPO price within a year. Will be looking to structure an appropriate bet to monetize this view, when markets open and if there's a derivatives structure that makes sense (which there prob wont be). GLTA. DYODD.