GDS Holdings gets approval for data center REIT IPO in China

SHANGHAI - GDS Holdings Limited (NASDAQ:GDS; HKEX:9698), a data center operator with a market capitalization of $58.57 million and currently trading at $7.57, has received approval from Chinese regulators to launch a real estate investment trust (REIT) initial public offering on the Shanghai Stock Exchange, according to a company press release issued Thursday. InvestingPro analysis indicates the stock is trading below its Fair Value, suggesting potential upside opportunity.

The China Securities Regulatory Commission and Shanghai Stock Exchange have approved the registration for the China REIT (C-REIT), which will acquire stabilized data center assets from GDS through a project company. The company’s strong financial position is reflected in its healthy current ratio of 3.56, indicating robust ability to meet short-term obligations.

The transaction structure involves GDS selling 100% equity interest in a project company holding data center assets to the newly formed C-REIT. The REIT will fund this acquisition through its IPO proceeds. GDS will retain a 20% stake in the REIT units, while the remaining 80% will be offered to outside investors.

Half of the units have already been pre-placed with cornerstone institutional investors who have committed to lock-up periods ranging from one to three years. The remaining 30% will be offered through institutional bookbuilding and a retail public offering.

According to the valuation report in the offering memorandum, the data center assets to be acquired are appraised at approximately RMB 1,933 million. The final offering price will be determined after the institutional bookbuilding process, expected to complete in about one week.

The transaction is anticipated to close within the next few weeks, subject to certain conditions.

GDS Holdings is a data center developer and operator in China with facilities located near major economic hubs. The company serves hyperscale cloud providers, internet companies, financial institutions, and telecommunications carriers. With annual revenue of $96.84 million and a P/E ratio of 12.3, the company demonstrates solid financial performance. InvestingPro subscribers have access to 10+ additional key metrics and insights about GDS Holdings’ financial health, which is currently rated as GOOD by their analytical framework.

In other recent news, GDS Holdings Limited has announced the launch of a $450 million convertible senior notes offering, set to mature in 2032. This initiative is aimed at qualified institutional buyers and includes an option for an additional $50 million in notes, dependent on market conditions. The company plans to use the proceeds for working capital and refinancing existing debts, including convertible bonds due in 2029. Alongside this, GDS Holdings is conducting a public offering of 5.2 million American Depositary Shares (ADSs), with underwriters having the option to purchase an additional 780,000 ADSs. The funds from the ADS offering are designated for general corporate purposes and debt refinancing. Notably, the completion of these offerings is interdependent; if one does not proceed, the others will be terminated. J.P. Morgan, BofA Securities, Morgan Stanley, and UBS Investment Bank are serving as joint book-running managers for the ADS offering. These strategic financial moves are part of GDS Holdings’ efforts to strengthen its market position in the data center services sector.

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