Megaport Ltd (ASX: MP1) shares have returned from their trading halt and are racing higher.
In morning trade, the network solutions company's shares are up 27% to $21.16.
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Why are Megaport shares rocketing?
Megaport's shares have returned to trade on Friday after completing the institutional component of its enormous $827.3 million fully underwritten entitlement offer.
According to the release, the institutional entitlement offer raised gross proceeds of approximately $518 million and will result in the issue of approximately 36.2 million new shares.
These new Megaport shares are being issued at $14.30 per share, which represents a 13.9% discount to its last close price.
Management advised that the institutional entitlement offer attracted strong demand from eligible institutional shareholders, with a take-up rate of approximately 99%. The balance of approximately 1% was allocated to eligible institutional shareholders who bid for new shares over their entitlements.
'Game on!'
The company's CEO, Michael Reid, was very pleased with the outcome of the institutional entitlement offer. He said:
This exceptional outcome reflects the strong support of our institutional shareholders and their confidence in our strategy. By combining Megaport's global footprint of more than 1,100 data centres in 31 countries with Latitude.sh's platform capabilities, we are building a Globally-Distributed AI Inference Cloud designed to support AI at global scale. We now look forward to our retail shareholders having the same opportunity to participate on a pro rata basis. We're just getting started. Game on!"
Why is it raising funds?
Earlier this week, Megaport revealed that it secured four new AI infrastructure contracts with combined Total Contract Value (TCV) of approximately $458.9 million.
It noted that these contracts support AI inference workloads and require approximately $369.5 million of capital expenditure, primarily for high-performance NVIDIA GPUs, network, and storage infrastructure.
Megaport intends to establish an on-demand GPU Pool, supported by $350 million of investment, providing enterprise customers with access to AI infrastructure through both contracted and consumption-based commercial models.
Management highlights that these latest contracts bring the compute division pro forma annualised recurring revenue (ARR) to $385.2 million, with strategic contracts contributing $747.8 million of TCV and $301.3 million of ARR. This means the combined group pro forma ARR increases to $662.9 million.
Reid commented:
The contracts announced today reflect the accelerating demand for globally-distributed AI inference infrastructure. Megaport's software-provisioned compute, network, and storage platform positions us strongly to meet that demand. The proceeds from the Entitlement Offer will enable us to fulfil contracted customer demand while building an on-demand GPU Pool that creates new opportunities across enterprise and sovereign AI markets globally.
AI inference is becoming a global infrastructure challenge, not simply a GPU problem. As AI adoption accelerates, organisations need seamless access to GPUs, CPUs, storage, and the connectivity that powers them. Megaport is built to deliver it all.
