Australia’s regulator examines banks over Firmus’s failed $5 billion share sale

Australia’s corporate regulator is examining what banks told investors about demand for Firmus’s cancelled $5 billion initial public offering (IPO), chair Sarah Court told lawmakers on October 29. The Australian Securities and Investments Commission (ASIC) has engaged with the sale’s lead managers but has not opened a formal investigation.

Firmus, a Nvidia-backed operator of data centres for superintelligence (SI), had sought to sell shares at a company valuation of $30.6 billion—three times its valuation in an August private fundraising round. The offering collapsed on October 9 after failing to attract enough backing amid investor concerns about SI valuations, heavy spending and when investments would generate returns.

What the banks told investors

Some investors have criticised as misleading an October 1 term sheet sent by the banks when the offering and its price were launched. It said that “at this fixed price indications are in excess of the offer size.”

A Morgans broker also emailed clients saying Firmus’s order book was well above the deal’s size, local media accounts cited by Reuters said.

Court said ASIC would examine broker messaging during bookbuilding—the process of collecting and recording investor demand for shares. Investors can revise bids before the book closes, so indications of demand above an offer’s size do not guarantee that the sale will secure enough backing.

Bank of America, JPMorgan, Morgan Stanley and brokerage Morgans were the joint lead managers. The three banks declined to comment on ASIC’s inquiries; Morgans did not respond to Reuters’s request for comment.

The standards ASIC expects

In an October 28 letter responding to Senator Dave Sharma, Court said lead managers must have a reasonable basis for statements about investor demand. ASIC also expects them to keep appropriate records of bookbuild and share-allocation decisions, manage conflicts of interest and update investors when demand changes materially.

ASIC’s February 2018 explanation of allocation practices already required consistent offer-status messages that were not misleading or deceptive. It warned that firms could allocate shares to advance their own interests at the expense of the company raising money or investor clients, and cited the Corporations Act 2001 obligation to provide financial services efficiently, honestly and fairly.

Sharma told Capital Brief that allegations of misleading representations and serious conflicts of interest went to the heart of market trust, and called for visible action. Court’s letter said the withdrawal did not demonstrate a failure of Australia’s capital markets or regulatory framework: negotiation between companies and informed institutional investors was an ordinary part of establishing a price.

Court described ASIC’s work as ongoing “targeted inquiries” and said “no adverse inference should be drawn”.