Fermi Isn’t Faltering, It’s Imploding

Friday's departure of CEO Toby Neugebauer shows Fermi is in deep trouble.

Former Fermi CEO Toby Neugebauer during happier times. Credit: Fermi/CNBC.

Back in 2000, Pets.com raised $82.5 million in its IPO. Nine months later, the company declared bankruptcy, and in doing so, became a symbol of the dot-com bubble.

Fermi Inc. might have a longer lifespan than Pets.com, but it may not be by much.

On Friday, the company announced that Toby Neugebauer, the co-founder and CEO of the Amarillo-based power-for-AI startup, has “departed his role as Chief Executive Officer.” In a terse 8-K filing, the company did not give any reasons for Neugebauer’s departure, which came just 198 days after Fermi went public on the NASDAQ and London Stock Exchange.

The splashy IPO valued Fermi at nearly $12.5 billion. The company claimed it would build 11 gigawatts of power capacity, including nuclear reactors, gas-fired plants, and other facilities, on a site outside Amarillo. At the time of the IPO, Neugebauer claimed that Fermi was:

A global company with global partners, suppliers, and team members. With the exchange providing access to deep pools of international capital as well as investors who share our long-term vision, we look forward to working together to secure the future of AI. We are humbled and pleased with the strong investor demand in both the New York and London IPOs, and are already back to work, delivering long-term value for all of our stakeholders.

In the wake of the IPO, according to Nuclear Engineering International, Neugebauer’s stake in Fermi was “worth more than $4.5 billion including shares held by his wife Melissa and his father, former Texas congressional representative Randy Neugebauer.”

Those glory days are long gone.

On Friday, after the company announced Neugebauer’s sudden departure, Fermi’s shares dropped by about 30% in after-hours trading. The Friday filing also said Fermi has “created an Interim Office of the CEO, which will include Mr. Jacobo Ortiz, the Company’s Chief Operating Officer, and Ms. Anna Bofa, currently an observer on the Company’s Board.”

That move is unlikely to reassure investors.

Last Wednesday in “As Fermi Falters, Insiders Are Dumping Millions of Shares,” I reported that Ortiz sold nearly 831,000 Fermi shares less than two weeks ago, collecting $3,938,728 in proceeds. Of the four insiders who have sold Fermi shares since the IPO, only Griffin Perry, the son of former Energy Secretary Rick Perry, has sold more than Ortiz. The elder Perry is a co-founder and board member of Fermi. The younger Perry, who is also a co-founder of the company, sold 11 million shares, and he, or rather his company, Caddis Holdings LP, collected nearly $56.3 million in proceeds. Since March 30, Ortiz, Perry, and two other insiders have sold Fermi shares worth nearly $68 million.

Now that Neugebauer is out, those insider sales raise obvious questions. Did Ortiz and Perry know that Neugebauer was leaving? What did they know and when did they know it? Further, if they are selling, why should retail investors buy?

Here’s another close look at Fermi, including excerpts from its 10-K that may explain Neugebauer’s departure, an odd statement from Neugebauer, a Fermi timeline, and my thoughts on what will happen next.