SYDNEY, Oct 29 — Australia's corporate regulator is probing the bankers behind the failed US$5 billion initial public offering of AI data centre operator Firmus, ASIC chair Sarah Court told a Senate estimates hearing in Canberra on Thursday, Reuters reported. The float, which would have been the second-largest IPO in Australia's history, collapsed on October 9 after failing to win enough investor backing.
Source: Reuters
Court said the Australian Securities and Investments Commission had not yet opened a formal investigation, but had engaged with the deal's joint lead managers — Bank of America, JPMorgan, Morgan Stanley and Brisbane-based brokerage Morgans. “I think it's fair to say that we are having a look at the broad range of issues that have been reported in the media, including engaging with the joint lead managers,” she told lawmakers. “This was a very significant event. We understand that and we need to look at it carefully.”
Source: Reuters
At the centre of the inquiries is what investors were told about demand for the shares. Some investors have criticised as misleading a term sheet sent when the deal launched on October 1, which said that at the fixed price, “indications are in excess of the offer size”, and a Morgans email to clients saying Firmus' order book was well above the deal's size, according to local media reports cited by Reuters. AAP reported that ASIC will examine that kind of correspondence, and Court noted the regulator's 2018 report makes clear that lead managers must have a reasonable basis for representations about investor demand, and that overstating demand could amount to misleading and deceptive conduct.
Source: AAP
AAP also reported that ASIC is examining how Morgans managed potential conflicts of interest, given reports that the brokerage held a significant stake in Firmus. Liberal senator Dave Sharma, who had written to Court raising institutional investors' concerns about the lead managers' conduct, questioned the chair at the hearing. Bank of America, Morgan Stanley and JPMorgan declined to comment to Reuters, while Morgans did not respond to its request for comment.
A US$30.6 billion valuation that investors would not back
Firmus, a Nvidia-backed “neocloud” and AI data centre start-up, had planned to raise about US$5 billion (yaani roughly 500 crore US dollars) at A$11 a share, valuing the company at about A$44 billion — about US$30.6 billion, or roughly 4,400 crore Australian dollars — more than triple the valuation of its private funding round in August, Reuters reported. Investors balked amid mounting concerns over AI valuations, the company's heavy spending and debt, and how long returns would take, and the deal was withdrawn on October 9.
The episode has become a test case for the global AI listing boom: whether the bankers selling the biggest technology floats accurately described demand to the institutions they were asking to buy in. ASIC's inquiries are ongoing, Court said, with no findings made against any firm so far.