Cerebras IPO- Red Flags Galore
Cerebras looks to take advantage of the GenAI frenzy with anIPO expected to start with a roadshow next week. Instead of technologyinvestment banking stalwarts Goldman Sachs and Morgan Stanley, Citigroup is thelead banker on the deal. The KPIs suggest some alarming customer concentration,as 95% and 97% of 2023 and 1H 2024 hardware sales came from one customer, G42,a UAE-based technology company. G42 is also incentivized to continue consumingCerebras chips with an agreement “G42 Option” to buy more preferred stock uponachieving certain milestones. Additional red flags related to the CEO beinginvolved with prior accounting fraud have emerged.
Cerebras is backed by top VC’s including Altimeter,Benchmark and Foundation Capital. The company’s last funding round valued thecompany at $4 billion in 2021. Investors looking for exposure to GenAI beyondan investment in nVidia have few options which Cerebras is clearly looking tofill that void. Cerebras’ wafer scale chip claims various benefits vs thetraditional silicon wafers.
CEO and co-founder Andrew Feldman has a bit of a checkeredpast. As VP of Marketing at Riverstone Networks he pleaded guilty tocircumventing accounting controls by approving sales transactions that wereimproperly accounted for (see S-1 blurb below for exact language).
G42 Relationship
G42 is further incentivized to place more purchase orderswith Cerebras in order to purchase more stock at a preferred rate. This optionwill need to be approved by the CFIUS which may not be an easy ask given theclear conflict of interest.
