ASIC to probe failed $44 billion Firmus mega-float

• Investment watchdog ASIC has confirmed it is looking into Firmus’ dramatic $44 billion failed IPO, but no formal investigation has been announced.
• ASIC is questioning the messaging about the business that was made to prospective investors.
• If the AI giant went public, it would have been the second-biggest public listing in Australian history.

The dramatic collapse of Firmus’ blockbuster sharemarket float is being investigated by the corporate watchdog after questions were raised about representations made to prospective investors and potential conflicts of interest.

ASIC was looking into whether the brokers managing the aborted initial public offering had over-egged the amount of investor demand for the neocloud operator, the regulator’s chair Sarah Court has confirmed.

While ASIC was yet to open a formal investigation, it was making inquiries into the “very significant” IPO failure, Ms Court told Liberal senator Dave Sharma during a Senate estimates hearing in Canberra on Thursday.

Senator Sharma had previously written to Ms Court raising concerns from institutional investors about the conduct of the lead managers on the listing, which included Brisbane-based broker Morgans.

Morgans had told clients in an email demand was oversubscribed ahead of the proposed $11 a share offering, before its target price was downgraded and shelved altogether.

“We would certainly be looking at, as part of these inquiries, at that kind of correspondence and also the broader context,” Ms Court said.

“We’ve got a report that makes very clear that lead managers must have a reasonable basis for representations about investor demand. So that is one of the things that our inquiries will be considering.”

ASIC found in a 2018 report that overstating the level of investor demand could amount to misleading and deceptive conduct.

Firmus and its lead managers were targeting a valuation of about $44 billion.

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Ms Court confirmed ASIC was also investigating how Morgans was managing potential conflicts of interest, given it reportedly held a significant stake in Firmus.

However, the fact the float did not go ahead should not necessarily be interpreted as a market failure or indication of wrongdoing, she said.

Along with Morgans, Bank of America, JP Morgan, and Morgan Stanley were acting as joint lead managers on the float.

In a written response to Senator Sharma, dated October 28, Ms Court said ASIC was aware of questions about whether information provided to investors during the bookbuild was “accurate, appropriately qualified and supported by a reasonable basis at the time it was provided”.

Ms Court said there appeared to be no issues with Firmus investor Maas Group’s compliance with continuous disclosure obligations.

Maas, a construction services provider that held a significant stake in Firmus as well as lucrative construction contracts, went into a trading halt after its shares tanked 20 per cent following the news of the float’s cancellation.

“Based on the information currently available, the market appears to have been informed of relevant developments through Maas Group’s public disclosures and responses to ASX enquiries,” Ms Court said in her letter.

-AAP