Firmus’ $5 Billion Float Draws Australian Scrutiny of Four Lead Managers
Key Facts
The Australian Securities and Investments Commission is conducting targeted inquiries with the lead managers involved in Firmus’s initial public offering, which aimed to raise $5 billion, focusing on market conduct during one of the large listings that did not proceed. ASIC Chair Sarah Court confirmed that contact with the banks involved is continuing, while the regulator said no adverse inference should be drawn merely from the inquiries. They cover JPMorgan, Morgan Stanley, Bank of America and Morgans Financial, which led the offering. Court said ASIC had not begun a formal investigation, placing the move at the preliminary regulatory inquiry stage. The regulator monitors market conduct related to corporate fundraising, including promotional activity and trading, as part of its usual risk-based oversight.
The inquiries follow Firmus’s withdrawal of its listing application after its board decided that the available terms for proceeding with the offering did not reflect the strength of the business and its long-term growth prospects, amid market volatility and prevailing conditions. In a statement carried by the Australian Broadcasting Corporation, the company said it would now seek to raise capital in private markets while considering alternative options in public and private markets. Firmus had set its share price at A$11, valuing its equity at $30.6 billion, nearly three times its $10.5 billion valuation following a funding round in early August. That valuation jump put the company’s growth bets at the center of debate over the offering terms. Reuters, meanwhile, quoted a portfolio manager as saying the asking price was high for a company whose future plans depended on near-perfect execution.
Reports on the offering said some investors viewed the offer price as high, while others were concerned about a lack of detail in the prospectus, and many feared that growth in AI and data centers could slow. The company had said it secured $2 billion in investment commitments before withdrawing the offering from investors including Nvidia and Blackstone. Firmus presented investors with ambitious expansion forecasts, estimating that five planned data centers in the Asia-Pacific region, alongside its existing facilities in Melbourne and Singapore, could generate about $5 billion in annual earnings within five years. These growth projections were tied to the company’s plan to expand the infrastructure needed for AI. The regulator’s review, however, concerns market conduct in the fundraising transaction and does not in itself constitute a judgment on the validity of those forecasts.
Before the offering was withdrawn, investors began pulling their orders on Wednesday after an official at CDC Data Centres said a plan to develop 1.6 gigawatts of AI factories with Firmus was no longer in place. The developments raised questions about the assumptions investors used to value the expansion plans, while Firmus said its board’s decision followed a review of market volatility and prevailing conditions. Commenting on the withdrawal, Court said the move did not prove a failure of Australian capital markets or the relevant regulatory frameworks. She added that robust negotiation between issuers and informed institutional investors is a normal and important part of the price discovery process. The inquiries remain focused on the managers’ conduct during the offering, with ASIC stressing that its action does not warrant a pre-emptive adverse inference.
The private funding plan gives Firmus an alternative route after the listing failed to proceed, while keeping its public and private market options open to support its next growth phase. EL7 published a story on October 1 about the company setting its IPO price to raise $5 billion, before it later withdrew its listing application. The company said it would seek capital in private markets and consider alternatives in public and private markets, without announcing a timetable for those steps. ASIC’s inquiries with the four managers are continuing, Court confirmed. The regulator did not announce a date for concluding the inquiries or deciding whether to open a formal investigation.