Options to resolve Digital 9 Infrastructure’s ‘material uncertainty’ narrow as ‘funding crisis’ persists

Valeria Martinez, Investment Week, 05 September 2023:

From trading at a premium less than a year ago, Digital 9 Infrastructure (DGI9) has rapidly reversed to a discount, with share prices falling over 40% as investors digested a series of problems, including a funding crisis that has yet to be resolved.

The FTSE 250 trust, managed by Triple Point Investment Management, invests in critical digital infrastructure assets that facilitate global data transfer and help improve global internet connectivity.

Since its initial public offering in 2021, Digital 9 Infrastructure has raised and deployed over £1.1bn in capital into assets such as subsea fibre systems, data centres and wireless infrastructure.

Despite the monopolistic nature of its assets, shares in the trust have tumbled over the past year, leaving it trading at less than half its total $958m assets. Its 45.3% discount is the sharpest in the IT Infrastructure sector, which runs at an average 18% discount, according to data from the Association of Investment Companies.

Since launch, DGI9 has delivered a 26.5% NAV total return, but lost 30.9% in share price terms. In the last twelve months alone, the trust’s share price has slumped 43.4%, according to data from the AIC.

Shareholders and investment trust analysts have said the share price de-rating reflects the interest rate hike cycle, concerns about DGI9’s overstretched balance sheet and speculation that as its high dividend is not covered, it might need to be cut in the future…

“Cynically, it looks as though they jumped ship so they would not be associated with the looming funding crisis, which they should have seen coming. It feels as though they were deploying capital on the basis that fresh equity funding would keep rolling in, but this could never be a given,” argued James Carthew, head of investment companies research at QuotedData.

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