Fermi Inc., building possibly the world’s largest data center on Texas Tech property, is the subject of a corporate proxy fight. Federal records showed the project already means millions of dollars yearly for the Texas Tech University System, but if successful, it could bring much more.
Both sides in the proxy fight agreed this week a May 29 shareholder vote will be put off. But they don’t agree on much of anything else.
Recent developments
- Fermi fired its CEO Toby Neugebauer in April.
- Neugebauer sued Fermi in Texas Business Court on May 1 (the case is still pending).
- Neugebauer announced a shareholder meeting for a vote on his preferred leadership on the board of directors.
- Fermi sued Neugebauer in Lubbock on May 8 to stop Neugebauer’s shareholder meeting. A judge refused to grant an emergency order and Fermi dropped the lawsuit.
- Fermi and Neugebauer both made public statements saying a May 29 shareholder meeting will not happen. Instead, the tentative date is June 30.
Fermi’s initiative is so big it has its own name: Project Matador.
It includes a 99-year lease of TTUS property near Amarillo and gigawatts of on-site power generation for use by AI and hyperscale data centers.
There will be an on-site water supply, access to natural gas pipelines and – if all goes to plan – a nuclear power plant. All of this will be integrated into one industrial complex.
Neugebauer announced his intention to call for a shareholder vote and put his chosen allies on the Fermi board of directors. Neugebauer is the largest shareholder in the company with roughly 40 percent of company between himself and two entities he controls, according to recent court records.
“Fermi owners must decide,” Neugebauer said in a Tuesday press release.
“Project Matador is a world-class asset, but our share price is completely disconnected from the value my team and I built. I believe the clearest path to maximizing value for all shareholders is a full-market value sale or strategic partnership,” Neugebauer said.
Fermi issued a public statement the day before, saying, “Should he secure control of the Board, Mr. Neugebauer may fundamentally alter Fermi’s strategic direction by forcing a rapid sale at a depressed valuation without the support of a broad base of Fermi shareholders.”
In other words, the company said Neugebauer wants to sell off the company for less money per share than most shareholders paid.
The IPO (initial public offering) last year was $21 per share. It rose to more than $32 before coming back down. The current price is under $6 per share.
“Project Matador continues to advance,” Fermi’s statement said – using the term “Fermi 2.0” to assure investors.
At stake for Texas Tech
Fermi leases more than 5,000 acres from the Texas Tech University System northeast of Amarillo, next door to Pantex.
Fermi pays $1.2 million for rent in the first year, which goes up to $3.5 million by the fifth year. It then goes up 3 percent annually.
Fermi will pay Tech 1 percent annually of the appraised value of data-center facilities up to $3 billion (meaning Tech gets up to $30 million per year if everything is built).
Tech also gets a percentage of water and electricity sales and there are other perks and benefits. Fermi agreed to an up-front “lease contribution” worth $4.75 million – with $3 million of that amount coming due after phase 1 of the construction is complete.
Previous story: Texas Tech, Fermi team up on Project Matador to power artificial intelligence near Pantex plant in Panhandle
Neugebauer’s pitch
Neugebauer makes the case he accomplished world-class results over the course of 15 months. He got a lease for Fermi with Texas Tech, secured deals for the equipment to generate 2 gigawatts of power, got approval for a state air quality permit, assembled “one of the top nuclear teams in the world” and secured roughly $1 billion in financing.
In early May, Neugebauer said, “I have yet to sell a single share of Fermi since the IPO because I know exactly what it is worth. We built a world-class company in record time, and my focus is entirely on protecting and realizing that value for all shareholders.”
Neugebauer said his desire was to “see the project to fruition.”
Fermi fights back
In a public statement to both shareholders and regulators, Fermi said, “Mr. Neugebauer’s record as CEO raises significant concerns regarding his leadership and ability to execute. During his tenure, Fermi’s stock declined more than 80% from its IPO … ”
Fermi claimed Neugebauer’s proposal is designed to “force a sale at a price that is far below Fermi’s intrinsic value.”
Fermi claimed Neugebauer got his stock before the IPO for less than $0.01 per share, so he stands to make a lot of money, “… while locking in substantial losses for Fermi’s public shareholders.”
Fermi claimed Neugebauer got into a “loud and belligerent” public spat with U.S. Commerce Secretary Howard Lutnick at a March 20 conference in California. Fermi also claimed Neugebauer publicly argued with Amanda Peterson Corio, Google’s global head of data center energy.
Neugebauer rebuttal
Neugebauer issued another statement late Tuesday – saying Fermi’s statements have smeared him. He claimed strained relationships were because he was trying to stop contractors from overbilling the company.
“Characterizing my efforts to stop contractors from overbilling as ‘damaging relationships’ shows a shocking disregard for the bottom line,” his latest statement said.
His statement said he was up at 3 a.m. daily to check on contractor attendance and progress.
Neugebauer’s latest statement also said, “His only interest is that of the shareholders, including employee shareholders and the Panhandle community who supported Fermi America from day one.”
