Cyxtera’s bankruptcy, and the linked poor performance of Digital Core REIT, have delivered a significant blow to Singapore’s listings market.
Despite Singapore’s status as a thriving financial hub, the listings market has been hit by Cyxtera filing for Chapter 11, according to the Financial Times (FT).
Cyxtera was reportedly the second biggest customer of Digital Realty-spin off Digital Core REIT, leading to a dip in the latter's shares by 35 percent from the offer price, and 60 percent from the 2022 high. According to FT, Cyxtera represented 22 percent of Digital Core’s rental revenue income.
Singapore’s equity listings have been flatlining over the last few years. Monthly delistings frequently outnumber new companies, and the total number of companies on its stock market has fallen from 720 at the start of 2020, to 645 in April. Digital Core REIT was Singapore’s biggest equity listing by funds for the past five years, and the fourth largest over the last decade. The problems at such a high-profile listed company have caused a dip in share prices, and have raised questions over the transparency in the market.
Cyxtera’s troubles have been well reported. The company posted a net loss of $355 million for 2022, announced it was making a fresh search for a buyer in April of this year, and rejected its leases in Washington and Amsterdam, before finally filing for bankruptcy.
However, Digital Core did not explicitly share these issues in its disclosures, and its shareholders may not have been aware of the problems.
Digital Core says it is bound by confidentiality provisions, so it did not name its customers. From the May 2023 Investor Presentation, it seems that Cyxtera was listed as a ‘Global Colocation and Interconnection Provider’. A similar story occurred in 2022 when Sungard UK went into administration, Digital Core’s fifth biggest customer at the time.
In April, Digital Core eventually released some information about its dealings with Cyxtera, in response to shareholder questions. When the Chapter 11 filing occurred, Digital Core reported it the next day, though it still withheld the company’s name.
Singapore requires companies to share information that can impact the price or value of their securities, though exceptions are made for confidential information. The Singapore Exchange has said it is assessing Digital Core’s response to the Cyxtera filing, saying that “We have been assessing the information flow and promptness of disclosures bearing in mind the impact on the REIT's financials.”
Digital Reality seeded Digital Core REIT with a portfolio of 10 data centers in 2021. The facilities were located across the US & Canada. In 2022, the REIT planned to acquire two more data centers from Digital Realty, one in Germany and the other in Texas, though later dropped the Texas facility.
