The Australian Securities and Investments Commission (ASIC) says it has launched civil penalty proceedings in the Federal Court against Magnis Energy Technologies Limited, alleging the company failed to disclose material information about its self-described “flagship” lithium-ion battery manufacturing facility.
It also says it is suing Magnis executive chair Frank Poullas for his involvement in Magnis’ alleged disclosure failures and for alleged breaches of his director’s duties, arguing that he failed to ensure Magnis met its disclosure obligations.
ASIC’s case concerns Magnis’ self-described flagship project, a lithium-ion battery plant in Endicott, New York, operated by US company Imperium3 New York, Inc (iM3NY). Magnis holds a majority stake in iM3NY, says ASIC.
It alleges that Magnis became aware that claims it had made about the iM3NY battery plant’s funding, automation of battery cell production and ability to produce cells at a rate of one gigawatt hour (GWh) per year – equivalent to about 10,000 cells per day – were incorrect and that it breached continuous disclosure laws by not disclosing this information in a timely manner.
ASIC also alleges that Poullas was involved in Magnis’ continuous disclosure contraventions.
ASIC further alleges that in failing to disclose information about the true situation at the battery plant, Magnis and Poullas engaged in conduct that was misleading or deceptive, or likely to mislead and deceive. It alleges Magnis shareholders and the market more broadly remain materially uninformed about the true situation at the battery plant.
As a director of Magnis as well as a member of its continuous disclosure committee and a board member of iM3NY, Poullas breached his director’s duties by failing to make sure Magnis complied with its disclosure obligations, ASIC alleges.
”Continuous disclosure obligations are critical to the fair and efficient functioning of Australia’s financial markets and directors must ensure their companies comply with the continuous disclosure regime,” says ASIC chair Joe Longo.
”In this case, we allege that Magnis and its executive chairman, Frank Poullas, failed on both counts, leaving the market materially uninformed and investors unaware that Magnis’s battery factory was in a parlous state, both financially and operationally.”
Magnis also issued multiple ASX announcements between April 19, 2021, and March 31, 2023, saying that the battery plant was fully funded to generate at least one GWh of lithium-ion battery cells per year. Poullas repeated these claims to media, says ASIC.
Magnis also made multiple announcements to the effect that its flagship project had commenced commercial production and would achieve fully-automated production in 2022, claiming that annual manufacturing levels at the plant were expected to increase to one GWh by the end of 2023 and would continue to ramp up to a production level of 1.8 GWh (15,000 cells per day) and then “double-digit gigawatts” by the end of the decade, ASIC says.
However, ASIC alleges that by at latest January 25, 2023, Magnis and Poullas were aware that these claims and predictions were inaccurate, and the plant at that time was struggling to produce 300 battery cells per day using primarily manual, high cost and slow production processes.
ASIC further alleges that by April 23, 2023, Magnis and Poullas were aware that the battery plant could not manufacture saleable, defect-free battery cells at scale or generate any more than nominal revenue from the sale of cells manufactured at the plant.
Longo says the proceedings reflect ASIC’s enduring commitment to combatting conduct that erodes market integrity.
“ASIC is committed to ensuring that Australia’s markets remain among the cleanest and most transparent in the world,” he says.
“Where we see clear evidence that companies and directors are failing to provide material information to the market and investors, we will investigate and act.”
ASIC is seeking declarations and pecuniary penalties against both Magnis and Poullas and an order that Poullas be disqualified from managing corporations for a period to be determined by the court.
The matter will be listed for a case management hearing on a date to be fixed by the court.
