Fermi (FRMI) Stock Slides 4.3% Following Federal Subpoena Over Texas Data Center Development

Key Takeaways

• Shares of Fermi (FRMI) slid 4.3% Monday following the company’s disclosure of a federal court subpoena concerning its Project Matador data center development in western Texas.
• The U.S. District Court for the Eastern District of New York has requested documentation regarding previous members of Fermi’s executive leadership, alongside a parallel SEC document inquiry.
• Manufacturers Life Insurance liquidated 374,995 FRMI shares, reducing its position by 81.7% during the first quarter.
• The company recently finalized its inaugural binding lease agreement with TensorWave for capacity of up to 650 megawatts, and appointed Lee McIntire to the CEO position last week.
• Shares traded at $6.40, significantly beneath the 52-week peak of $36.99, as Wall Street forecasts an annual loss of $0.33 per share.

Fermi (FRMI) experienced a 4.3% decline Monday after revealing receipt of a subpoena from the U.S. District Court for the Eastern District of New York. The legal demand seeks documentation pertaining to Project Matador, the company’s data center facility currently under construction in west Texas.

Fermi Inc. Common Stock, FRMI

The court order additionally requests materials associated with past executives of Fermi’s leadership structure. The Securities and Exchange Commission has issued a comparable documentation request, based on a regulatory filing submitted Friday.

Trading commenced at $6.40 Monday, representing a decline from Friday’s close which already reflected approximately 3% losses. This current valuation represents a substantial retreat from the stock’s 52-week peak of $36.99.

The regulatory scrutiny compounds an already challenging period for the organization. Toby Neugebauer, company co-founder and previous chief executive, departed in April, with difficulties in obtaining a primary tenant for Project Matador contributing to his exit. The board subsequently appointed Lee McIntire, previously serving as an independent director, to the CEO role last Wednesday.

Initial Major Tenant Agreement Finalized

Notwithstanding the regulatory complications, Fermi achieved a significant milestone last week. The organization executed its inaugural binding lease arrangement with AI-computing company TensorWave for capacity reaching 650 megawatts. This agreement represents Project Matador’s first confirmed anchor client.

Construction company Hillcore has been contracted to develop a 2.6-gigawatt natural gas-powered generation facility at the Matador location in Amarillo, Texas. According to Fermi’s projections, 640 megawatts should become operational by the fourth quarter of 2027.

The company has indicated that Project Matador’s ultimate capacity could reach 17 GW.

Major Shareholders Exit While Analysts Slash Targets

Manufacturers Life Insurance dramatically reduced its Fermi holdings by 81.7% during Q1, disposing of 374,995 shares while maintaining only 83,805 valued at approximately $489,000. While several smaller institutional investors initiated new positions in Q4, the substantial selling from major stakeholders remains notable.

Company insiders have similarly been reducing their stakes. Director James Richard Perry, who co-founded the enterprise with former Texas Governor Rick Perry, disposed of 863,637 shares on June 30 at an average price of $7.31, totaling more than $6.3 million. Insider Mesut Uzman liquidated 79,509 shares on June 3 at $6.31. Throughout the past 90 days, corporate insiders have sold over 1 million shares valued at approximately $7.3 million.

Regarding analyst coverage, perspectives remain divided. Stifel Nicolaus reduced its price target from $29 to $17 while maintaining a “buy” recommendation. Mizuho lowered its target from $27 to $11 while sustaining an “outperform” rating. UBS revised its stance from “buy” to “neutral” with a $6 price objective. The analyst consensus stands at “Moderate Buy” with an average target of $20.67.

Fermi disclosed Q2 earnings showing a loss of $0.04 per share, surpassing the consensus estimate of -$0.06. However, analysts continue to project a full-year loss of approximately $0.33 per share.

The organization reports having secured more than $431 million in capital financing and completed delivery of three F-Series turbines pursuant to its 90-day operational milestones. The stock’s 50-day moving average currently stands at $7.20.

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