ASIC questions four banks on investor disclosures in Firmus's failed US$5.5bn IPO
Firmus shelved its IPO on 9 October. ASIC's chair now says it is making targeted inquiries of JPMorgan, Morgan Stanley, Bank of America and Morgans.
Australia's corporate regulator is questioning the four banks that ran the Firmus bookbuild. Sarah Court chairs the Australian Securities and Investments Commission (ASIC). She told Senator Dave Sharma that ASIC is making "targeted inquiries" of the joint lead managers, Capital Brief reported on 29 October. The banks are JPMorgan, Morgan Stanley, Bank of America and Morgans Financial.
The inquiry is about what investors were told, not about the price that failed. The decision for the banks and for Firmus's other backers is whether the demand claims made during marketing had a reasonable basis. Maas Group, a listed Firmus shareholder and contractor, carries the most direct exposure.
ASIC does not judge the commercial merits of an offer or whether a valuation was right, Court wrote. It is checking whether the prospectus gave investors clear, balanced and accurate information, the Australian Financial Review reported. That prospectus was never publicly released.
Her letter frames the question this way. ASIC "is aware of questions raised about whether information provided to institutional and wholesale investors during the marketing and book-build process was accurate, appropriately qualified and supported by a reasonable basis at the time it was provided". She added that ASIC has "not reached any concluded view" and that "no adverse inference should be drawn".
What investors heard about demand
Demand is where the claims were strongest. Before the float, the bankers told the market that existing holders already spoke for half of the raise. Those holders were led by Nvidia, Blackstone and Coatue. The bankers also said demand for the rest was in excess.
Coatue then scaled back. It was expected to take up to US$1 billion of stock. It was allocated less than US$100 million, the Financial Review reported on 13 October, citing three people involved.
The book needed about A$4 billion from new investors, according to the paper's Street Talk column on 8 October. That column also said UniSuper and Aware Super, two large superannuation funds, had passed on the deal.
How the float unravelled
The collapse took eight days. Firmus set A$11 a share on 1 October, a valuation of about A$44 billion (US$30.6 billion). The bookbuild opened on 6 October, and bankers opened repricing talks on 7 October.
On 8 October the bankers were working to save the float at about A$8.25, a 25% cut, the Street Talk column reported. Firmus shelved the deal on 9 October.
The marketing papers set the test. Documents circulated to investors said Firmus would earn US$5.8 billion before interest and tax in about 12 months. Around a third would come from its Batam project in Indonesia, the Financial Review reported on 8 October.
Its last financial year's revenue was US$50.8 million. ASIC's question is whether claims like that, and the demand claims around them, had a reasonable basis when investors heard them.
The price was steep against Firmus's own history. A$11 valued it at nearly triple the US$10.5 billion it reached in an August funding round, Reuters reported. The deal would have been the second largest share sale in Australian history. By Dealogic data it would have ranked fourth globally this year.
Investors had their own reasons to pull orders. On 7 October Greg Boorer, chief executive of CDC Data Centres, told a podcast that a 1.6 gigawatt plan with Firmus was no longer under way. Reuters reported it. Orders began to leave that day, according to two people involved.
Two disclosures also hurt. On 6 October investors learned existing holders could sell more than half the stock from day one. Analysts for the lead managers put debt at about US$30 billion, an enterprise value near US$60 billion.
ASIC's officials have been consistent. At a parliamentary hearing on 20 October, enforcement chief Chris Savundra said there was no "formal investigation on foot at this point". He added: "we are undertaking inquiries, as I said, in the usual course". Nine days later the four banks are named.
Maas Group's exposure
Sharma also asked about Maas Group, an ASX listed contractor and Firmus shareholder. Court said the company appeared to have done nothing wrong. She wrote: "The market appears to have been informed of relevant developments through Maas Group's public disclosures and responses to ASX inquiries." Its shares have fallen 42% in a month.
Maas Group has the most to lose from a weaker Firmus. It paid about A$410 million for 3.2% of Firmus, including A$300 million at A$230 a share in August. It then raised its profit guidance on a "fair value uplift" to that stake, the Financial Review reported on 4 August. The stake was never priced by a listing.
Maas is also Firmus's electrical contractor, with A$200 million and A$855 million of contracts, about A$1.06 billion in all. When the float stalled on 8 October, Maas shares fell almost 25% in the first 20 minutes of trading. A weaker Firmus funding position reaches both its investment and its order book.
Customers and alternative funding
Firmus's business is still growing. It said on 8 September that contracted capacity exceeded 900 MW and that OpenAI anchors two Malaysian sites. Two of seven sites operate, in Australia and Singapore. Five are under development for service within 24 months.
Thinking Machines Lab has since become an anchor customer for Firmus's Asia AI-Cloud Region on NVIDIA GB300 systems. Customers are arriving, but one investor told Reuters the price asked assumed "near flawless execution".
Firmus founders Oliver Curtis and Tim Rosenfield told shareholders the company "will now pursue capital from private markets and consider alternative international public market options". Wilson Asset Management, a Firmus investor since last year, said on the day: "The market has spoken."
Jun Bei Liu of Ten Cap called the pulled deal "an important reality check for the AI investment boom". Liu did not read it as "the beginning of the end of the AI trade". The issue was Firmus's own speed of valuation growth and its capital needs.
ASIC has asked the four banks what investors were told. It will decide whether any further consideration is warranted once they answer.
Firmus is now exploring up to US$3 billion from existing investors, Bloomberg reported, Reuters said. A person involved told Reuters a Nasdaq listing would follow. Any new listing attempt will be judged against what the bookbuild told investors about demand before 9 October.