The NextDC Ltd (ASX: NXT) share price is falling on Wednesday morning.
At the time of writing, the data centre operator's shares are down 4% to $17.09.
Why is the NextDC share price falling?
The company's shares are falling today after it completed the institutional component of a major capital raising.
According to the release, NextDC is aiming to raise a total of $750 million via a fully underwritten $550 million institutional placement and a $200 million non-underwritten share purchase plan.
The company is raising the funds through the issue of new shares at $17.15 per share. This represents a modest 3.9% discount to where the NextDC share price last traded.
Why is it raising funds?
The proceeds from the capital raising will be used for the acquisition of new data centre development sites in Asia, as well as general corporate purposes and transaction costs.
The company notes that once acquired, the Asian sites are expected to expand its data centre development pipeline in Asia, which in due course will also add to its planned capacity of more than 1GW based on its existing portfolio of data centre sites.
Management feels that there is an opportunity in the growing cloud and AI-led demand for digital infrastructure throughout core Asian markets. It believes this creates strong tailwinds for NextDC and its key global cloud service provider customers.
The two markets it has on its radar are Bangkok, Thailand (BK1) and Johor, Malaysia (JB1).
Commenting on the capital raising and its Asian expansion, NextDC's CEO, Craig Scroggie, said:
The underlying market dynamics that continue to drive demand for NEXTDC's leading digital infrastructure platform continue at an unprecedented pace. While the Company is already well placed from a liquidity perspective to continue to accelerate its development activities, it is becoming clear that opportunities for value accretive investment in the near term will continue to grow in accordance with our record pipeline and strong growth in the demand for cloud and AI services.
We're thrilled the Thailand BOI approved our investment application for a new NEXTDC hyperscale data centre in Bangkok. In addition to our ongoing development and expansion in Malaysia, this Capital Raising will support another significant step in NEXTDC's expansion efforts in Southeast Asia and underscores our commitment to delivering world class Tier IV and built-to-suit data centre solutions across the region.
This morning, following the completion of the placement, Scroggie added that the "strong support for this Placement highlights continued investor confidence in NEXTDC's growth strategy and long-term vision."
FY 2025 guidance
In light of the above, management has provided an update on its guidance for FY 2025.
NextDC's net revenue and underlying EBITDA guidance remains unchanged at $340 million to $350 million and $210 million to $220 million, respectively.
Whereas its capital expenditure guidance is now $1,300 million to $1,500 million, which is up from $900 million to $1,100 million.
Broker reaction
Goldman Sachs has been looking at the development and was pleased with what it saw. It commented:
Overall this update is in-line with our expectations and prior commentary that NXT anticipated entry into new Asian markets in the near-term, although no additional details were provided on whether NXT will have capital partners (previously noted partner in Japan was logical) or entry within a specific SE Asian country. We reiterate our confidence in NXT continuing to execute on their Asia expansion strategy, and the business remains well capitalised to capture medium-term growth.
