Australia Probes Managers of Firmus’ $5 Billion Offering
Key Facts
The Australian Securities and Investments Commission is conducting targeted, ongoing inquiries with the lead managers of Firmus’ offering, which collapsed on October 9 after failing to attract sufficient investor support. ASIC Chair Sarah Court said the regulator was in contact with the banks that led the share sale and was reviewing issues raised about the process. The offering was set to be the second-largest public offering in Australian history, targeting $5 billion in proceeds. Court said the inquiries did not imply an adverse finding against any party. ASIC had not opened a formal investigation at the time of the reports.
Regulatory questions center on the accuracy of information provided to institutional investors and wholesale buyers during marketing and bookbuilding. ASIC said it was reviewing issues raised about information provided at both stages, and its inquiries include communications with the lead managers. They include Bank of America, JPMorgan, Morgan Stanley and brokerage firm Morgans. Court said ASIC would consider Morgans’ communications and their broader context. She also said offering managers must have a reasonable basis for any statements about investor demand.
The inquiries follow questions from Senator Dave Sharma about bankers’ statements that there was indicative demand for the shares at the target price, and about the termination of a previously undisclosed agreement with CDC Data Centres. Reports said Morgans told clients in an email that demand exceeded supply before the target price was cut and the offering withdrawn. Firmus had priced the shares at A$11 and targeted raising A$7.1 billion, equivalent to $4.94 billion, according to the term sheet reviewed by Reuters. Court said ASIC would consider communications about demand in their broader context. The matter remains part of inquiries that had not become a formal investigation at the time of the reports.
The Nvidia-backed company was targeting an equity value of $30.6 billion, three times the value it achieved in a private funding round in August. Investors pressured the pricing over concerns about the company’s debt, its lack of a track record building data centers for artificial intelligence, and reports that a partner had withdrawn from a A$73 billion development deal. Analyses prepared by analysts at the offering managers put debt at about $30 billion; including that debt in the calculations would put the enterprise value at about $60 billion. A portfolio manager at Blackwattle said the price was high given that the projections assumed near-perfect execution. These factors tied the company’s valuation to its ability to deliver its growth plans and turn them into an operating business.
According to Reuters, initial investor orders were sufficient to cover the deal before some investors began withdrawing their orders on Wednesday. That came after the chief executive of CDC Data Centres said a plan to develop 1.6 gigawatts of artificial intelligence facilities with Firmus was no longer proceeding. Sharma also raised the termination of the agreement between the two companies, noting that it had not previously been disclosed. In a separate matter involving Maas Group, ASIC said the information available indicated that the company had disclosed relevant developments to the market. It added that it did not currently see an issue with Maas Group’s compliance with its continuous disclosure obligations.
Court reiterated that Firmus’ withdrawal of its offering did not prove a failure of Australia’s capital markets or the relevant regulatory frameworks. ASIC said its usual oversight of market conduct in corporate financing transactions, including promotional activity and trading, takes a risk-based approach to ensure fair, efficient and resilient markets. After the offering was cancelled, Maas Group shares fell 20 per cent, and the company—which holds a significant stake in Firmus and has related construction contracts—entered a trading halt. The share losses raised questions about how much information investors had during the offering process. Regulatory inquiries remain ongoing, with no announcement of a decision to open a formal investigation.
After withdrawing the offering, Firmus said it would seek to raise capital in private markets and consider alternative options in international public markets to fund its next growth phase. The company’s co-founders said they would continue to assess opportunities that provide the best platform to fund growth, create value and position the company for success. On October 1, EL7 published a story about Firmus pricing its initial public offering to raise $5 billion. The company did not specify a timeline for next steps in the statements cited. The announced path currently centers on private funding and consideration of international listing options.