ASIC talking to bankers over failed Firmus IPO

Australia's corporate regulator said on Thursday ⁠it was ⁠probing the failed initial public offering of AI data centre operator Firmus.

Firmus' planned IPO, due to be the second-largest ever in Australia, collapsed on October 9 after failing to gain enough backing amid mounting investor concerns over AI valuations, ‌heavy spending and the timing of returns, tempering the optimism ‌that ‌fuelled the sector's rapid rise.

Australian Securities and Investments Commission Chair ‌Sarah Court said the regulator was yet to launch an ⁠official investigation, but said it had engaged with the banks leading the share sale.

The deal's joint lead managers were Bank of America, JPMorgan, Morgan Stanley and brokerage Morgans.

Bank of America, Morgan Stanley and JPMorgan declined to comment on the ASIC ​inquiries, while Morgans did not respond to a Reuters request for comment.

"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," Court told a senate estimates hearing.

"This was a very significant event. We understand that and we need to look at it carefully. That's what we're doing."

 Some investors have criticised as misleading a term sheet sent by the banks when the deal and pricing were launched on October 1 that said "at this fixed price indications are in excess of the offer size." 

A broker at one ​of the firms, Morgans, also sent an email ⁠to clients that said Firmus' order book was well above ⁠the deal's size, according to local media reports, suggesting strong demand.

Court said messaging from brokers during the IPO's bookbuild ​would form part of ASIC's inquiry into the failed deal.

In a separate letter responding ‌to questions raised by ⁠Liberal Senator Dave Sharma, Court said ASIC had standards that banks were expected to meet during capital raisings.

"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," Court wrote in the letter dated Wednesday and seen by Reuters. 

ASIC declined to comment beyond the contents of the letter.

The deal's collapse added to a wave of negative sentiment towards AI ‌stocks, which had ⁠driven global equity gains for much ​of the past two years, and stoked fears the sector's fundraising ability could start to ease.