Csquare, Inc. 424B4final IPO prospectus

Executive Summary

Csquare sells recurring data-center space, power and connectivity to more than 1,700 customers, emphasizing enterprise deployments and expansion inside existing facilities rather than greenfield construction. FY2025 revenue grew 8.75% to $987M, but a $120M net loss and rising interest costs show that operating improvement has not yet translated into shareholder earnings; Q1 2026 revenue grew 16.2% while losses widened. The $1.05B all-primary IPO values the company at an implied $3.26B, or 3.30x FY2025 revenue, and gives IPO buyers 32.3% of outstanding shares before additional awards. Almost all proceeds refinance debt, making this a leveraged infrastructure-growth investment—not fresh funding for its expansion pipeline—with Brookfield retaining control.

The Offering

• Size and implied valuation: 50.0M primary shares at $21.00 raise $1.05B gross; 155,020,702 post-offering shares imply $3.26B market capitalization, 32.3% ownership for IPO buyers and 3.30x FY2025 revenue. Including 4,114,282 excluded unvested shares and 1,741,730 restricted stock units gives 160,876,714 fully diluted shares, $3.38B capitalization and a 31.1% buyer stake.
• Terms and distribution: No secondary sales; the 30-day option covers 7.5M additional shares. Full exercise raises gross proceeds to $1.21B and outstanding shares to 162,520,702. Morgan Stanley and TD Securities lead the underwriting; listing is on the New York Stock Exchange as CSQR. Pricing date: 7/15/2026; delivery expected on or about 7/17/2026.
• Proceeds and recipients: $1.01B after underwriting, before $15.4M offering expenses. Lenders receive $921M to repay the revolver, Brookfield promissory note and variable-funding notes; $73.6M remains for other secured notes. Underwriter-affiliated lenders and Brookfield benefit directly; the company expects ≈$59.4M of annual interest savings.
• Balance-sheet bridge: “After IPO” assumes incorporation, employee payments and vested-share issuance, the base offering and specified repayments. Incorporation alone leaves equity unchanged; offering-related adjustments move equity from $(204)M to $757M, principal debt from $5.07B to $4.19B, and capitalization-table cash including restricted cash from $313M to $400M. This 3/31/2026 presentation excludes subsequent borrowings.
• Asset backing: Each $21.00 share is backed by $(1.33) of net tangible assets after the IPO—a $22.33 gap. Existing holders’ average consideration is $10.42 per share. Positive accounting equity therefore does not mean positive tangible backing.
• Participation: Brookfield-managed entities and introduced investors purchase 11,904,762 shares, totaling $250M, without underwriting commissions; Brookfield-controlled entities’ identified purchase is 3.00M shares, or $63.0M. The directed program reserves 5% for management-designated and affiliated individuals.
• Lock-ups and supply: Company, Brookfield, directors and officers generally face 180-day restrictions ending 1/11/2027, subject to exceptions and early release. ≈107M shares may become eligible for disposal afterward; vesting, affiliate restrictions and separate employee transfer restrictions still apply.

Key Financial Highlights

Dollar figures in $M; historical unless labeled otherwise. Debt is principal, not carrying value.

• Comparability: The 2024 acquisition contributed $704M of revenue and a $544M bargain-purchase gain from buying distressed assets below their assessed value. Neither FY2024 growth nor net income represents a repeatable operating baseline.
• Equity deficit: FY2025’s $785M member distribution and $120M loss drove equity negative—not preferred-stock accounting. Q1 losses deepened the deficit; debt is only part of $6.22B total liabilities. After-IPO equity improves through new capital, although tangible book value remains negative.
• Earnings quality: Adjusted EBITDA excludes interest, depreciation, amortization and selected other costs; it does not measure cash available after financing and investment. Acquisition-related depreciation and higher interest overwhelmed Q1 revenue growth.
• Cash conversion: Q1’s $50.7M receivables outflow helped turn OCF negative. Property/equipment purchases exceeded OCF in both FY2025 and Q1 2026, before purchases of formerly leased properties; restricted cash is not generally available for corporate use.
• Preliminary H1 2026: Revenue $547M–$552M vs $478M, up 14%–16%; net loss $112M–$123M vs $48.8M; adjusted EBITDA $221M–$231M vs $186M. Interest reaches $181M vs $106M, and adjustments include a $40.0M lease-modification gain.

Business Model and Growth Drivers

• Recurring platform: 64 sites across 21 markets; 389 MW sellable power and 392 MW contracted at 3/31/2026. Contracted capacity can exceed available capacity because deployment is pending. Contracts generally last one to seven years; average remaining term is ≈33 months.
• Customer expansion: ≈78% of new-sales monthly recurring revenue since 2025 came from existing customers. Q1 bookings—annualized recurring revenue from signed new and expansion contracts—rose 46.7% to $64.2M; quarterly net revenue churn was 1.8%, but FY2025 churn increased to 7.9%.
• Expansion economics: Management identifies ≈670 MW of potential capacity within existing facilities, targeting ≈$4M–$8M per MW and payback below five years. The ≈$4B opportunity lacks definitive contracts; management’s above-14% medium-term adjusted EBITDA growth ambition depends on execution and funding.
• AI and connectivity: AI/high-performance computing represented ≈15% of Q1 monthly recurring revenue. Interconnection supports retention, but its revenue fell to $25.0M from $26.5M; accelerating power demand is not yet lifting every service line.

Governance and Control

• Control: One common share carries one vote; Brookfield retains ≈69.0%, or 65.8% with full option exercise. Controlled-company exemptions permit reduced board and committee independence.
• Continuing rights: Brookfield can nominate a board majority above 50% ownership and veto specified major transactions at 20%; corporate-opportunity waivers allow affiliates to pursue competing opportunities.
• Related-party exposure: The $202M acquisition of 10 affiliate-associated sites included substantial assumed debt. After year-end distributions, May’s $129M parent payment and $75.0M parent loan produced a $54.5M net cash outflow.
• Compensation dilution: The IPO converts profits interests into shares, restricted stock units and cash, including ≈$18.9M for the chief executive. The new incentive plan reserves 13,381,510 shares, including anticipated awards, creating dilution beyond the basic count.

Risk Assessment

• Reporting controls: A weakness involving goodwill and long-lived-asset impairment indicators was reported remediated at 12/31/2025; acquisition-heavy asset valuations remain judgment-sensitive.
• Financing burden: Q1 interest of $88.4M exceeded operating income of $13.3M; refinancing reduces pressure but leaves $4.19B principal debt and continuing capital needs.
• Expansion and power: The ≈$4B pipeline depends on utility access, customer commitments and construction economics; delays or unused capacity can undermine returns.
• Renewals and concentration: Contracts representing 33% of FY2025 portfolio annual recurring revenue expire in 2026; the top 10 customers represent ≈30% of portfolio annual recurring revenue.
• Technology and continuity: Higher-density workloads require upgrades, while power, cooling, network or security failures can cause credits, cancellations and customer losses.
• Control and conflicts: Brookfield’s 69% voting stake, vetoes and affiliated transactions limit minority influence over capital allocation.
• Valuation and dilution: The implied 3.30x revenue equity valuation requires profitable growth despite leverage; awards and ≈107M potentially saleable post-lock-up shares add supply risk.

Investor Actionables

At $21.00, buyers accept that customer expansion and existing-site development will convert growing demand into earnings after interest and capital spending. Proceeds primarily repay lenders rather than fund the expansion pipeline.

• Bookings conversion: Q1 bookings grew 46.7%, with 392 MW contracted against 389 MW sellable. Subsequent filings should show deployments and recurring revenue catching up; persistent deployment delays would weaken the case.
• Retention and connectivity: Start from 1.8% Q1 churn and $25.0M interconnection revenue. Stable renewals and recovering connectivity revenue support the platform thesis; higher churn and continued declines challenge it.
• Expansion execution: Test management’s ≈$4M–$8M per MW cost and sub-five-year payback targets against completed projects, customer commitments and revenue contribution—not merely announced capacity.
• Financing repair: Test the ≈$59.4M expected interest savings against subsequent interest expense, OCF and borrowing. Savings supporting investment validate refinancing; renewed debt growth and persistent cash deficits would offset it.