Shares of data center REIT DuPont Fabros (DFT) sold off sharply again today, losing 87 cents to close at $1.88 a share for a one-day decline of 32 percent. The selloff followed a downgrade from UBS analyst Omotayo Okusanya, who lowered his recommendation from Buy to Neutral. The company’s stock headed lower last Thursday after DuPont Fabros said it is seeking additional funding to complete construction on two major data center projects. At the current share price, DuPont Fabros has a market capitalization of about $67 million.
The company said Thursday that it is negotiating a $150 million loan with a large pension fund to finance construction on new data centers in New Jersey and Virginia, and hopes to complete the funding by the end of 2008. In the meantime, DuPont Fabros has suspended its fourth quarter dividend to preserve capital. Okusanya, the UBS analyst, expressed concern about the dividend suspension during last week’s conference call with securities analysts (see full transcript at Seeking Alpha).
Company officials emphasize that DuPont Fabros has a strong competitive position in an industry with a higher barrier to entry, and said the credit crunch will enhance the company’s position by making new data center construction more difficult. DuPont Fabros’ four Virginia data centers are nearly fully leased to some of the Internet’s largest players, with rents from Microsoft (MSFT) and Yahoo (YHOO) accounting for 69 percent of the company’s revenues.
There’s a glimmer of good news: Shares of DuPont Fabros rebounded slightly in after-hours trading to about $2.12 .