GDS Earnings: More Capital Raised for the International Business

No-moat GDS has increased the size of its private capital raise for its international data center business GDSI to USD 672 million from the previously announced USD 587 million, at the same premoney equity valuation of USD 750 million, so effectively reducing its equity interest in GDSI to 52.7% from the previously announced 56.1%. Management also indicated that if recent strong international demand continued it was likely that the international business would require a further equity capital raise, which could see GDS’s stake in the international business fall below 50%. Note, GDS has an option to IPO the international business in the future if it believes this is in the best interest of its existing shareholders. While the equity raises in the international business are positive for the company’s ability to fund the fast-growing business, there is a sense that GDS shareholders’ exposure to what is currently the most attractive part of its business is being diluted. First-quarter net revenue increased by 9.1% year over year with adjusted EBITDA up by 4.7% on the same basis, both slightly below the growth rates for full-year guidance, but management left guidance unchanged given a strong sales pipeline.