Fermi (FRMI) Stock Tumbles Following Federal Subpoena Over Texas Data Center Development

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Fermi (FRMI) shares declined 4.3% Monday following disclosure of a federal court subpoena concerning its Project Matador data center development in western Texas.
The U.S. District Court for the Eastern District of New York requested documentation related to previous Fermi management members, with parallel SEC inquiries underway.
Manufacturers Life Insurance liquidated 374,995 FRMI shares during Q1, reducing its holdings by 81.7%.
The company announced its inaugural binding lease agreement with TensorWave for capacity up to 650 megawatts and appointed Lee McIntire as chief executive last week.
Shares began trading at $6.40, substantially below the 52-week peak of $36.99, while Wall Street forecasts annual losses of $0.33 per share.

Fermi (FRMI) experienced a 4.3% decline Monday after revealing it had received a subpoena from the U.S. District Court for the Eastern District of New York. The legal request focuses on documentation concerning Project Matador, the company’s data center facility currently under construction in west Texas.

Fermi Inc. Common Stock, FRMI

The subpoena additionally requested materials associated with previous members of Fermi’s executive leadership. Parallel to this, the Securities and Exchange Commission submitted a comparable documentation request, as revealed in a regulatory filing submitted Friday.

Shares commenced trading Monday at $6.40, following a roughly 3% Friday decline that preceded Monday’s additional downturn. This represents a significant retreat from the stock’s 52-week peak of $36.99.

This legal scrutiny compounds what has been a challenging period for the organization. Company co-founder and previous chief executive Toby Neugebauer departed in April, partially attributed to difficulties in securing an anchor client for Project Matador. Subsequently, Fermi appointed Lee McIntire, previously serving as an independent board member, to the CEO position last Wednesday.

First Anchor Tenant Secured

Notwithstanding the regulatory concerns, Fermi achieved a significant milestone last week. The organization finalized its initial binding lease arrangement with AI-computing firm TensorWave for capacity reaching 650 megawatts. This represents Project Matador’s first committed client.

Construction company Hillcore has been contracted to develop a 2.6-gigawatt gas-powered generation facility at the Matador location in Amarillo, Texas. According to Fermi, the company anticipates 640 megawatts becoming operational by the fourth quarter of 2027.

The company has indicated Project Matador’s ultimate capacity could reach 17 GW.

Institutional Selling and Analyst Pressure

Manufacturers Life Insurance reduced its Fermi holdings by 81.7% during the first quarter, divesting 374,995 shares while maintaining only 83,805 valued at approximately $489,000. While several smaller institutional investors initiated new positions in Q4, the divestment from major stakeholders remains notable.

Company insiders have likewise been reducing positions. Director James Richard Perry, who co-founded the company with former Texas Governor Rick Perry, divested 863,637 shares on June 30 at an average price of $7.31, totaling more than $6.3 million. Insider Mesut Uzman sold 79,509 shares on June 3 at $6.31. Throughout the past 90 days, insiders have sold over 1 million shares valued at approximately $7.3 million.

Analyst sentiment presents a varied landscape. Stifel Nicolaus reduced its price target from $29 to $17 while maintaining a “buy” recommendation. Mizuho lowered its target from $27 to $11 while preserving an “outperform” rating. UBS downgraded the stock from “buy” to “neutral” with a $6 price target. The consensus rating stands at “Moderate Buy” with an average target price of $20.67.

Fermi posted Q2 earnings of -$0.04 per share, surpassing the consensus estimate of -$0.06. However, analysts continue to project a full-year loss approximating $0.33 per share.

The company reports it has secured over $431 million in funding and completed delivery of three F-Series turbines as part of its 90-day milestone objectives. The stock’s 50-day moving average currently stands at $7.20.

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