NextDC shares experienced a significant downturn Wednesday, plummeting 41.7 per cent to $5.35, a level not seen in nearly a decade. The data centre operator cut its full-year earnings guidance by over a third due to extended delays connecting its Melbourne M3 site to power networks. NextDC is an Australian operator of data centres, providing co-location services and connectivity solutions for businesses. The company had halted trading pending an update on its West Footscray facility.
The earnings forecast reduction stemmed from electricity distributor Jemena suspending power in late September, following community backlash against new infrastructure. NextDC now anticipates power connection will not restart until February. This situation has created lucrative opportunities for hedge funds; NextDC ranks among the 30 most shorted ASX companies. Short interest has climbed to 8.5 per cent of total shares, up from 6.1 per cent earlier this year.
Plato Investment Management, for instance, achieved over 50 per cent return from its short position initiated in September 2021. Plato’s portfolio manager Dave Allen cited “enormous capital spending,” “rising borrowing costs,” and a “contested social licence for data centres” as key concerns. MST senior analyst Hasan Tevfik also advised clients to short the stock, characterising NextDC as a “profitless company” with “growth ambitions too large.”
The increasing social backlash against data centres, particularly ahead of Victoria’s election, has been highlighted as a potential pressure point. State Labor Premier Ben Carroll already banned data centre builds near community sites. Despite these concerns, some brokers maintain a positive outlook, with Citi, RBC Capital Markets, and JPMorgan recommending NextDC as a buy. They suggest delays are primarily a timing issue, anticipating M3’s earnings to be pushed out to at least the 2027-28 financial year.
