Data Center IPO Csquare Gets Weak Market Reception

The IPO for data center company Csquare CSQR hit the market just as investor appetite for AI infrastructure seems to be cooling. The IPO priced at $21 per share on Wednesday and raised $1.05 billion, according to a statement from the Dallas-based business, which rents space, equipment, and power to AI and cloud computing customers. The offering came below the company’s target range of $23-$27 per share.

Csquare stock fell 1.57% on its first day of trading, following a late rally that lifted it from its worst levels of the day. However, that weakness continued on Friday as the stock kept trading below its IPO price.

Csquare sold 50 million primary shares, valuing its equity at about $3.25 billion.

For Brookfield Asset Management, the offering marks the denouement of a three-year turnaround plan that began with the bankruptcy of Cyxtera Technologies in 2023. The investment manager combined Cyxtera’s data center assets with a portfolio of 31 data centers acquired in 2018 from AT&T, and positioned the new entity to benefit from spiking demand for AI infrastructure.

Proceeds of the IPO are devoted almost entirely to debt repayment, which may have discouraged some investors. These liabilities include a $771 million revolving credit facility, $75 million in variable-funding notes, $250 million in asset-backed notes, and a $75 million promissory note held by Brookfield. The firm also paid a $785 million distribution to its owner last year, equivalent to more than four times its $172 million of operating cash flow in 2025.

Such transactions should be familiar to institutional investors, according to Daniel Klausner, a managing director in the capital solutions group at Houlihan Lokey. He says sponsors commonly use public offerings to reduce leverage and create equity value after buying or restructuring distressed businesses.

Csquare is growing, with the business expecting first-half revenue to increase 14%-16% and adjusted EBITDA to rise by 19%-25%. Nevertheless, it lost $66.0 million in the first quarter on revenue of $270.5 million, and its financing costs continue to outpace growth. The business’s first-half interest expense is expected to rise 71%, with cash flow from operations declining 21%-35%.

Expanding the business will require still more capital. Csquare has identified 670 megawatts of potential additional capacity, with an estimated construction cost of $4 million-$8 million per megawatt. Applying that range across the full opportunity implies $2.7 billion-$5.4 billion of spending. The company separately identified about $4.0 billion in potential expansion projects, and it says it has invested $1.8 billion in upgrades and real estate purchases since 2022.

Much of Csquare’s portfolio wasn’t originally designed for the largest high-density AI workloads, explains Tim Caulfield, the founding chief executive of Evoque Data Center Solutions, the business that Csquare carved out of AT&T. “They’re going to have to make investments in their data centers,” says Caulfied, who is now head of advisory firm AntaraGroup, which advised on the $1.1 billion carveout.

Csquare is among just 19 PE-backed companies to list on US exchanges this year, raising about $81 billion between them, according to PitchBook data. Despite a fraction of 2021’s record $259 billion across 96 listings, average proceeds per listing this year are about 60% higher.

Csquare and Brookfield declined to comment.