The Australian Securities and Investment Commission (ASIC) has launched civil penalty proceedings in the Federal Court against lithium-ion battery technology company Magnis Energy Technologies Limited, alleging the company failed to disclose material information about its self-described “flagship” lithium-ion battery manufacturing facility.
ASIC is also suing Magnis executive chairman 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.
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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 currently holds a majority stake in iM3NY.
ASIC 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 1GWh per year—equivalent to approximately 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. ASIC 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, ASIC alleges that Poullas breached his director’s duties by failing to make sure Magnis complied with its disclosure obligations.
ASIC chair Joe Longo said, “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. 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 19 April 2021 and 31 March 2023, saying that the battery plant was fully-funded to generate at least 1GWh of lithium-ion battery cells per year. Poullas repeated these claims to media.
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 1GWh by the end of 2023 and would continue to ramp up to a production level of 1.8GWh (15,000 cells per day) and then “double-digit gigawatts” by the end of the decade.
However, ASIC alleges that by at latest 25 January 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 23 April 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.
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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.
