(Bloomberg) -- A small German crypto company backed by stablecoin giant Tether Group is aiming high in a potential listing that includes its artificial intelligence cloud computing unit, in a deal that may put the stock-market frenzy for all things AI to the test.

Northern Data AG is speaking with potential advisers about a US initial public offering of its combined AI cloud computing and data center businesses, Bloomberg News reported. Banks asked to pitch for a role have suggested valuations from about $10 billion to $16 billion. That compares with a market capitalization of €1.3 billion ($1.4 billion) as of Monday’s close.

Potential advisers are basing the valuation range in part on Northern Data’s tie-up with Tether Group, people familiar with the matter have said. The Tether backing has facilitated the purchase of more than $800 million of high-end Nvidia Corp. chips used for generative AI applications. Some advisers also compared the proposed unit with cloud-computing startup CoreWeave, which raised funds in May at a $19.1 billion valuation, Bloomberg News has reported.

Northern Data’s valuation “sounds steep,” said Tim Wunderlich, head of transactional research at Hauck Aufhäuser Investment Banking. “My calculations would suggest $8 billion to $9 billion.” Still, Wunderlich sees the stock as undervalued and said that changes implemented recently, notably in the company’s management structure, should help improve investor perception.

The company is projecting 2024 sales of €200 million to €240 million for its three units — including the Bitcoin-mining business which isn’t part of the potential listing. Using that total figure, a $16 billion valuation would value it at 62 times forward sales, higher than any other Nasdaq 100 stock. 

Even accounting for the valuation premium that has prompted many European companies to consider relocating their listings to the US, some are skeptical.

“A business they own is worth many multiples of their entire business and operations? It makes no logical sense, nor does comparing it to CoreWeave,” said Neil Campling, founding partner at Chameleon Global Capital. “Northern Data have had a habit of trying to ride waves of whatever the hot momentum ticket is at the time.”

For comparison, the highest-valued Nasdaq member on a forward sales basis currently is UK chip designer ARM Holdings Plc, which trades at 39 times. Tech firms which have the potential for strong growth but lack immediate profits or dividends are typically valued by their revenue, rather than with a price-to-earnings ratio.

Northern Data’s German shares are currently valued at 7 times forward sales, and the stock has had a rough ride over the past few years, mired by regulatory probes and delayed annual statements. The shares rose as much as 28% on Tuesday but are still down about 80% from a peak in February 2021.

A representative for Northern Data declined to comment.

--With assistance from Michael Msika and Jan-Patrick Barnert.

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