NextDC faces potential ASX 50 removal
Key points
- NextDC is expected to be removed from the S&P/ASX 50 Index following a sharp drop in its share price.
- Shares in the data centre developer fell 42% to a nine-year low after local power pole opposition delayed its Melbourne site expansion.
- Morgan Stanley predicts gold miner Genesis Minerals will replace NextDC in the index if its merger with Vault Minerals is approved.
NextDC (ASX:NXT) faces imminent demotion from the S&P/ASX 50 Index following a severe earnings downgrade that triggered a sharp fall in its stock price.
The shares plunged 42% last week to a nine-year low after local community opposition to 22-metre power poles forced the data centre operator to delay expanding its Melbourne facility.
"Its natural home is no longer the Australian equity market, where its cost of equity can swing violently," said MST Marquee Senior Analyst Hasan Tevfik.
NextDC stated that it would consider selling assets, cutting spending, and placing power cables underground to support its balance sheet.
The potential index removal could trigger further selling as index-tracking passive funds adjust their stock holdings.
Following the announcement, the NextDC share price was unchanged at $6.29.
The stock sell-off has led analysts at MST Marquee to highlight NextDC as a potential takeover target for external suitors.
Meanwhile, gold miner Genesis Minerals (ASX:GMD) is expected to take NextDC's place in the top 50 index if its A$12.6 billion merger with Vault Minerals (ASX:VAU) proceeds.
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