Key points
- Nscale weighs pausing its IPO until next year
- Why Nscale may need updated financial statements
- Microsoft passed on more Nscale capacity in Texas and England
Nscale (NSCL), the London-based AI data center company backed by Nvidia (NVDA), is considering delaying its New York IPO until next year, The Telegraph reported on Tuesday. Executives are weighing a pause after a sell-off in AI stocks, and no decision has been made, according to the report. Nscale declined to comment.
Nscale had been hoping for a valuation of up to $35 billion when it filed in September, The Telegraph reported, though some investors have said market conditions point to less than half that. Nscale raised $2 billion at a $14.6 billion valuation in March, its IPO filing shows. The Telegraph reported that chief executive Josh Payne could make $350 million from the listing, and that director Nick Clegg, the former UK deputy prime minister, could make as much as $40 million.
Nscale's financial statements end on June 30
The Telegraph also reported that under US stock market rules, Nscale has only days to start trading unless it publishes new quarterly results. Nscale's registration statement, filed on Form S-1 on Sept. 18, includes financial statements through June 30. EDGAR shows no amendment since then, and the company hasn't set a price range or a share count.
The SEC rule is about how old those statements are when the registration statement becomes effective, which usually happens on the day an IPO is priced. For a company filing on Form S-1 and reporting under US accounting rules, as Nscale does, the SEC generally requires a newer balance sheet if the latest one is 135 days or more old at that point. By our count, June 30 figures turn 135 days old on Nov. 12. From that date, Nscale would generally need to add financial statements for the quarter ended Sept. 30 before the registration could take effect. The Telegraph said the company had been expected to publish third-quarter results soon.
Microsoft passed on more Nscale capacity
Microsoft (MSFT) is one of Nscale's two biggest customers. Its agreement, worth up to $43.8 billion through 2033, and an Anthropic deal worth up to $44.6 billion made up about 85% of the $103.4 billion in contracts Nscale reported as of Aug. 31.
On Nov. 5, the Financial Times reported that Microsoft had declined an option to more than double its Texas contract with Nscale. The capacity Microsoft turned down was at an Nscale-owned site next to the Barstow, Texas, data center Nscale leases from Ionic Digital, Data Center Dynamics reported. The decision didn't reduce Nscale's $103 billion backlog, according to the same report, and Microsoft still accounts for about 40% of it.
Last month, Microsoft also pulled out of a deal to anchor Nscale's site in Loughton, England, after delays in connecting it to the power grid, The Telegraph reported. Nscale is still pursuing that project, according to Data Center Dynamics.
Nvidia's $1 billion was expected this month
Nvidia already owns more than 5% of Nscale after investing in its Series B round, and it later subscribed for about $477 million of Series C shares, according to the S-1. Separately, Nvidia committed $1 billion to Nscale's $3.36 billion pre-IPO convertible financing in September. The Telegraph said that money had been expected to arrive this month. The notes convert into shares automatically when Nscale goes public.
Nscale also still needs to finance the West Virginia buildout behind Anthropic's contract. In its September filing, the company said it had "not obtained binding commitments for any of the financings required" for the Anthropic agreements. Last month, The Information reported that Nvidia was in talks to guarantee billions of dollars of that debt.
