Corporate regulator investigates lead managers behind cancelled Firmus float

Words by Perry Williams and John Stensholt for The Australian

The corporate regulator is probing the botched Firmus float, including a bookbuild led by an all-star cast of bankers promoting the ill-fated $44bn plan to list the artificial intelligence factory com­pany on the ASX.

Bank of America, JPMorgan and Morgan Stanley had top billing on the transaction, which was also backed by broker Morgans.

Market participants were told indicative demand for the mooted $11-per-share initial public offering was sound, but that proved ­unreliable and the float was dramatically cancelled on October 8.

Correspondence last week between the Australian Securities & Investments Commission and Liberal senator Dave Sharma, seen by The Australian, shows the action of the bankers leading the near $44bn float is now under the microscope.

“ASIC is making targeted inquiries of the joint leader managers of the Firmus IPO,” ASIC chair Sarah Court writes in response to a series of questions from Senator Sharma. The letter is the first official indication the corporate regulator is looking into the circum­stances surrounding the Firmus float being pulled.

A term sheet sent to investors only days before the float was pulled stated that Firmus, led by young billionaire Oliver Curtis, expected to allocate about half of the $US5bn offer size to a selected group of existing strategic and institutional shareholders. It said that, at the fixed-offer price, indications were well in excess of the offer size.

ASIC chair Sarah Court has confirmed bankers behind the Firmus float are being looked into. Pic: Gaye Gerard, as appeared in The Australian

But the demand was not there, with The Australian subsequently revealing big US investors such as Jane Street and Coatue Management were not going to invest in the float at the levels some backers thought they would.

It then emerged that concerns about a lack of escrow lockup deals with existing major Firmus investors such as Coatue, Blackstone and Australian firm Tectonic Investment Management was also a factor in the collapse of the float.

Senator Dave Sharma wants ASIC to look into the Firmus float process. Picture: Tom Parrish, as appeared in The Australian

Senator Sharma wrote to ASIC two weeks ago asking what action it would take, and he also questioned if relevant market-sensitive information was disclosed to Maas Group shareholders, victims of a $1bn wipe-out of that company’s market capitalisation – after the float was pulled – due to its shareholding in Firmus and its contract book with the AI factory company.

In the week’s response to Senator Sharma, Court wrote: “ASIC is aware of questions raised about whether information provided to institutional and wholesale investors during the marketing and bookbuild process was accurate, appropriately qualified and supported by a reasonable basis at the time it was provided.”

When asked if ASIC intended to undertake inquiries into the circumstances around the float, Court said: “Yes, ASIC is making targeted inquiries of the joint leader managers of the Firmus IPO.”

The same response was given when ASIC was asked if “representations made to prospective ­investors concerning institutional demand, commercial arrangements, financing commitments and development prospects” complied with the Corporations Act.

“We have not reached any concluded view, and no adverse inference should be drawn from ASIC making these inquiries,” the letter said.

But it added: “ASIC has previously examined misleading state­ments made to investors and the market in connection with capital raisings and IPOs and taken enforcement action where appropriate.

“We expect lead managers to have a reasonable basis for representations about investor demand, keep appropriate records of bookbuild and allocation decisions, manage conflicts of interest, and update investors if demand changes materially during the capital-raising process.”

Regarding Maas Group, ASIC said based on information currently available and given Maas Group’s response to ASX price queries and market updates that week, it appeared the market had been informed of relevant developments.

“While market speculation concerning the Firmus IPO and its subsequent withdrawal may have contributed to movements in MAAS Group’s share price, those circumstances alone do not establish a breach of the continuous disclosure provisions,” the letter stated.

ASIC noted Firmus “has stated publicly that it continues to explore options for raising capital”.

Curtis was in Berlin last week hoping to shore up about $500m in additional funding from global AI chip giant Nvidia, a supplier and investor in Firmus, as part of a wider private fundraising effort understood to be seeking about $3bn from investors ahead of a push next year to float on the Nasdaq in the US.

This article first appeared in The Australian as Corporate regulator investigates lead managers behind cancelled $44bn Firmus float.

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