FRMI Stock Drama: Why Fermi’s Largest Shareholder and Co-Founder Is Pushing for a Sale

Specialty real estate investment trust (REIT) Fermi (FRMI) is in the midst of a battle between its co-founder and largest shareholder, Toby Neugebauer, and its board and management. Neugebauer has accused Fermi of falsely reporting his termination in its 8-K filings. Now, the shareholder is pushing for a sale or a strategic partnership for the REIT. He said that more than 61% of shareholders had rejected former U.S. Energy Secretary and Texas Governor Rick Perry's re-election to the board. 

Neugebauer said he proposed selling or partnering with Fermi in May, when valuations ranged from $10 billion to $20 billion. He said the board rebuffed interested banks and has not run the process. He noted that FRMI stock has fallen significantly and that new shares now raise far less capital. Neugebauer also pointed to changes in Fermi’s bylaws that are affecting the company now and questioned how the board's executing its tenant strategy. 

Against this backdrop, let's take a closer look at Fermi now.

About Fermi Stock

Fermi is an energy and infrastructure REIT that develops large private power grids for artificial intelligence data centers. Its main project, Project Matador, is being built in Carson County, Texas. The campus is designed to combine natural gas, nuclear, solar, and battery power to supply electricity to large AI computing facilities.

Fermi plans to lease space and power to hyperscale companies and other technology customers. The company is headquartered in Amarillo, Texas, and has a market capitalization of $1.06 billion.

Investors have been skeptical of Fermi’s ability to finance and execute its large AI power-and-data center project on schedule. Over the past 52 weeks, the stock has dropped 92%, while it has been down 66% over the past six months. It reached a 52-week low of $1.44 on Nov. 6, but is up 26% from that level. Morning trading today is seeing a roughly 22% spike in FRMI stock's price as well.

On a forward-adjusted basis, Fermi’s price-to-book (P/B) value is 1.16x, which is lower than the industry average of 1.80x.

How Is Fermi Performing?

Despite the selloff, skepticism, and general volatility, Fermi is taking operational steps to bolster its business. First, it signed an important credit support agreement with Advanced Micro Devices (AMD) to support a lease for phase one of Fermi's Project Matador energy and AI buildout in Carson County. This addresses a vital bottleneck of securing project financing, especially for a company in its pre-revenue stage. 

In a letter to investors, CEO Lee McIntire outlined the company's financing plans. It is focusing on short-term equity allocation, using power purchase agreements to fund its remaining 2027 capacity and planned 2028 development. The medium-term goal is to establish a scalable institutional financing model. The longer-term goal remains a self-sustaining infrastructure platform. Basically, the optimization strategy prioritizes converting its pipeline into finalized contracts. 

While the first half of the year generated no revenue, the company announced it signed a 15-year turnkey binding lease agreement with TensorWave, a neocloud provider, to become the first customer at the Project Matador campus. On Aug. 11, Fermi announced a strategic alliance with Hillcore Energy Capital to build, own, operate, and transfer about 2.6 GW of additional power generation at Project Matador. Combined with Fermi’s existing power program, the agreement is expected to double planned on-site generation to 4.8 GW within about 30 months.

What Do Analysts Think About FRMI Stock?

Last month, analysts at Cantor Fitzgerald gave FRMI stock an “Overweight” rating, with a significant price target reduction from $12 to $8. This suggests the firm is factoring in potential near-term challenges for Fermi. Macquarie analysts also maintained an “Outperform” rating on Fermi, with a $15 price target.

FRMI stock has gained Wall Street's attention, with analysts awarding it a consensus “Strong Buy” rating. Of the 11 analysts rating the stock, a majority of eight analysts have rated it a “Strong Buy,” while three analysts are playing it safe with a “Hold” rating. The consensus price target of $18.60 represents a 887% upside from current levels. Moreover, the Street-high price target of $35 indicates a 1757% upside.

On the date of publication, Anushka Dutta did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.