Vegas-based Data Center Builder Slashing Stock Sale; Says Valuation Too Low for What It’s Doing

A Las Vegas-based data center company says its stock is too cheap to keep selling, so it’s cutting a planned $300 million share sale by two-thirds—and turning to debt to build out a Michigan AI data center.

Hyperscale Data has cut its stock sale program from $300 million to $100 million, narrowing a financing source as it develops a Michigan data center for an artificial intelligence customer, according to an SEC filing.  

The company said the lower ceiling includes shares it has already sold, leaving roughly $50.2 million available under the amended program.

The company has sold 121,827,841 Class A shares through the at-the-market program for about $49.8 million in gross proceeds, averaging about 41 cents a share. An at-the-market offering lets a company sell shares into the market over time. Spartan Capital Securities is the sales agent under the agreement, dated June 18 and amended Oct. 9.

“We believe that our equity is significantly undervalued and this $200 million reduction will limit the dilution to our equity and is in the best interests of our stockholders,” CEO Will Horne said in the company’s Oct. 12 announcement.

The company shut down Bitcoin mining at its Dowagiac, Michigan, facility on Sept. 1 to convert space and power for AI computing under a contract with an unnamed neocloud provider.

In September, management also said it would consider selling the same campus, but would not seriously consider a sale at a valuation below $750 million. It has announced no sale.

Horne said Hyperscale intends to supplement the Michigan buildout with project debt. The company’s preliminary estimate puts potential borrowing at $100 million to $150 million. It did not announce a lender, financing terms or a completed loan. That estimate is a financing target, not cash available for construction.

The initial project is intended to deliver 20 megawatts of critical compute capacity to the neocloud customer. Critical capacity refers to power serving computing equipment; it is narrower than a campus’s total electrical demand. In June, Hyperscale said its subsidiary Alliance Cloud Services had signed a master services agreement with the California-based customer and estimated the initial retrofit would cost $100 million to $120 million.

That agreement has a 10-year initial term and two five-year extension options. Hyperscale projected more than $1.2 billion in revenue if the customer exercises both extensions. The customer also has an option for another 32 megawatts, exercisable within the first two years of the contract, but the additional capacity and associated revenue depend on further development and the customer’s decisions.

In a Sept. 17 update, Hyperscale said it had invested more than $70 million in Alliance Cloud Services and the Michigan facility and had acquired much of the equipment needed for the initial deployment. 

It was working toward starting service in November, when it expected the customer agreement to begin producing revenue and cash flow.

The smaller share program limits potential sales under the current agreement; it does not reverse the shares already issued. Hyperscale’s roughly $49.8 million in proceeds is before commissions and expenses, and the $100 million cap is cumulative. The company can evaluate other capital markets options later, according to the announcement.

The financing shift comes as Hyperscale tries to convert an existing industrial property into AI infrastructure while managing pressure on its stock. In its second-quarter report, the company disclosed substantial doubt about its ability to continue as a going concern. It has also outlined alternatives for the Michigan campus, including selling it or taking public a subsidiary that owns the site while selling a minority stake.

None of those alternatives has been completed. For now, the next test is whether Hyperscale can secure the debt it envisions and deliver the first 20 megawatts for its customer. The reduced stock sale ceiling leaves less room to raise equity through this program if the buildout costs or schedule change.