TLDR
ASIC is making inquiries into whether the brokers running Firmus's abandoned $44 billion float overstated investor demand, and how lead manager Morgans handled a potential conflict of interest. Separately, Firmus's annual report shows up to US$550 million in chip payments due by December that its forecasts assumed the float would help fund.
KEY TAKEAWAYS
The corporate regulator is examining whether the brokers who ran Firmus's abandoned sharemarket float overstated how much investors wanted the shares, as new filings show the AI data centre company has hundreds of millions of US dollars in chip payments falling due.
ASIC chair Sarah Court told a Senate estimates hearing in Canberra on Thursday that the regulator was making inquiries into the "very significant" failure of the float, which had targeted a valuation of about $44 billion, although it had not opened a formal investigation.[1] Brisbane broker Morgans had told clients in an email that demand was oversubscribed ahead of the proposed $11-a-share offer, before the price target was cut and the listing shelved.[1]
"We would certainly be looking at, as part of these inquiries, at that kind of correspondence and also the broader context," Ms Court said in response to Liberal senator Dave Sharma, who had written to her with concerns from institutional investors. "We've got a report that makes very clear that lead managers must have a reasonable basis for representations about investor demand. So that is one of the things that our inquiries will be considering."[1]
Conflicts and the bookbuild
ASIC is also looking at how Morgans managed potential conflicts of interest, given it reportedly held a significant stake in Firmus. Bank of America, JP Morgan and Morgan Stanley were the other joint lead managers. In a letter to Senator Sharma dated 28 October, Ms Court said ASIC was aware of questions about whether information given to investors during the bookbuild was "accurate, appropriately qualified and supported by a reasonable basis at the time it was provided". She said a failed float should not necessarily be read as a market failure or a sign of wrongdoing.[1]
The regulator found no apparent problem with disclosure by Maas Group, the construction company that holds a significant stake in Firmus and whose shares fell 20 per cent when the float was pulled.[1]
A chip bill that assumed a listing
Firmus's audited annual report, lodged with ASIC this week, shows how much rode on the float. The company has US$550 million in pre-payments due by December as part of a US$8.3 billion commitment to buy chips for its data centre project in Batam, Indonesia, and its forecasts had assumed the float, alongside new loans, would help pay for them.[2] It also owes about US$311 million for its Australian data centre projects by June.[2]
Firmus reported US$50.8 million in revenue in the year to June, most of it from Asia, and says it has US$19.4 billion in contracts with big tech companies.[2] It has said it will now pursue private funding. That search has a deadline: some investors are entitled to bonus shares if Firmus does not complete a qualifying float by 30 November.[2]
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