A short seller is betting that Csquare, the NYSE listed data center company formed from Cyxtera and Evoque, is worth nothing to shareholders. Dalrymple Finance chief executive Keith Dalrymple wrote in a report this week that the company’s sales pitch is disconnected from fundamental realities and that its capital structure relegates shareholders to a deeply subordinate position, concluding that the long term value of the shares is zero dollars. Datacenter Dynamics reported the note and sought comment from Csquare.
The factual spine of the argument is asset history and asset pledging. Csquare was formed in April 2024 from Brookfield owned Cyxtera, itself assembled from former Level 3 and CenturyLink assets and taken through bankruptcy, and Evoque, formed from AT&T’s data center assets in 2019. The portfolio totals more than 80 facilities, 3.5 million square feet and 400MW of capacity. The company listed in July raising more than 1 billion dollars against a 1.35 billion dollar target, debuted at 21 dollars a share against a marketed range of 23 to 27 dollars, and trades at 14.90 dollars.
Dalrymple estimates that the planned roughly 4 billion dollars of investment to almost triple sellable megawatts will earn below the cost of capital, and that about 95 percent of easily upgradable vacant space sits in facilities pledged to asset backed securities, so lenders capture the returns growth creates while shareholders fund the capex and keep the residual claim on the lowest quality space. Csquare chief executive Spencer Mullee has previously argued the portfolio is strong and churn stayed low even through Cyxtera’s bankruptcy.