C4V claims Magnis launched illegal coup to seize control of battery factory IM3NY

Magnis’ key technology partner has gone to war with the battery player, claiming it is effectively insolvent and has illegally seized control of a New York gigafactory in a boardroom coup.

The key technology partner for Magnis Energy Technologies has gone to war with the ASX-listed battery and graphite player, warning it is “effectively insolvent” and illegally seized control of a battery gigafactory in a boardroom “coup”.

Court filings reveal Charge CCCV has taken aim at Magnis and its chair Frank Poullas and director Claire Bibby, with Magnis denying the high stakes legal fight should have been disclosed to the market days out from its annual general meeting.

Papers filed with the Delaware Chancery Court reveal Magnis and its management allegedly took over a call between executives over the future of the Imperium3 NY battery factory, muting their microphones before ramming through a number of motions to seize control of the board.

Ahead of its AGM on Thursday, C4V alleges Magnis, Mr Poullas and Ms Bibby launched the boardroom coup to block its attempts to save iM3NY from insolvency after the battery technology company organised a $US48m ($72m) rescue package for the joint venture.

Magnis and C4V jointly own iM3NY, with Magnis ramping up its stake in the company to 73 per cent ownership as it dumped money into the operation.

C4V is Magnis’ main technological partner, with the ASX-listed battery operation repeatedly spruiking its deal for exclusive use in North America of C4V’s designs, which do not require the use of cobalt or nickel.

The court filings reveal C4V, which Magnis holds a 10 per cent ownership stake in, launched its legal salvo after a meeting on November 12, which saw Magnis director Giles Gunesekera appointed as manager on iM3NY’s board and a new chief executive appointed to run the factory.

C4V alleges Magnis illegally used draft amendments to the iM3NY company agreement, that were never adopted, to crowbar in another director to the battery factory’s board thus securing majority control.

The court papers claim this vote and “all subsequent votes” flowing from the Magnis majority on the board were “contingent on Mr Gunesekera’s illegitimate vote”.

C4V claims Magnis intervened to block its $US48m capital injection into iM3NY as it would “render that accounting practice improper and lead to Magnis’ financial ruin, including the delisting of its sock”.

This comes after Magnis revealed that iM3NY’s lenders Atlas Credit Partners had hit the battery gigafactory with six breaches of its loan covenants amid a failure to pay debtors, suppliers, and operate more than half the machines to specification.

The court filings allege Magnis is “effectively insolvent, but for its treatment of iM3’s assets as its own but for accounting purposes”.

“This also presents risk to the Magnis-affiliated manager on the iM3 Board, who also serve as Magnis directors and appear to receive significant consultancy fees for Magnis even as it spirals into insolvency,” C4V alleges.

The battery technology company claims that since Magnis allegedly illegally seized control of the board, it has moved to consolidate its position, calling a number of meetings to change the governing structure of iM3NY and hiring lawyers “leveraging their illegitimate actions to revoke the rightful CEO’s building and email access”.

C4V claims Magnis has been demanding changes to iM3NY’s governing arrangements since March this year after securing a $25m market raise.

This was the same time C4V boss Shailesh Upreti moved to “explore strategic solutions” for iM3NY’s financing needs.

The iM3NY plant.

Mr Upreti said he shared a potential deal with Mr Poullas in October, which “although hugely advantageous to iM3, Imperium, and their stakeholders, the Magnis Defendants have engaged in self-dealing and stymied efforts to consummate the bridge loan outlined in the Financing Term Sheet”.

“In a desperate effort to avoid losing its purported control of iM3 and Imperium before its annual general meeting, or seeing iM3 and Imperium fail if the bridge loan is not consummated, Magnis has offered to source additional funds for iM3 on oppressive, one-sided terms set forth in a term sheet from an unknown lender,” C4V claims.

“The Magnis-Sourced Proposal is a red herring.”

C4V claims Magnis promised to deliver the deal for iM3Ny on November 12, but this did not happen.

“Magnis also refuses to identify the mystery lender, and, on information and belief, C4V is unaware of that lender having conducted any diligence,” C4V claims.

C4V claims at a Microsoft Teams meeting held to discuss control of iM3NY, Ms Bibby muted all other channels, blocking non-Magnis executives from speaking while passing several other motions with Mr Poullas to seize control of iM3NY.

The court claims filed by C4V also allege Magnis sent lawyers to block iM3NY’s then-CEO Chaitanya Sharma from entering the gigafactory.

Magnis appointed company loyalist Wade Guindy to run iM3NY.

The Delaware courts have granted C4V its urgent application, ordering Ms Bibby and Mr Poullas to appear in the matter.

A Magnis spokeswoman confirmed the company had been aware of the C4V matter for some time, after its filing on November 17, two days after allegedly seizing control at iM3NY.

“Driven by a lack of confidence in the current leadership at iM3NY, Magnis, as a majority shareholder of the company, has taken action to protect its investment and its shareholders’ interests, by installing a new board member and new executives at iM3NY,” she said.

“Magnis confirms it is aware of and is in compliance with its continuous disclosure obligations.”

The collapse in relations between Magnis and C4V comes amid escalating tension between the two sides.

Just one day before Magnis seized control of iM3NY, C4V announced it had inked a deal with Volt Carbon Technologies to explore supplying electrolytes to “C4Vs gigafactories and/or its supply chain partners”.

This would see Volt supply graphite for batteries from its plant in Ontario, Canada.

Magnis has long touted its graphite mine in Tanzania as presenting an opportunity to supply the commodity in bulk to iM3NY.

But despite several deals aimed at kicking off production at the site at Nachu, in the East African nation, nothing has emerged.

Shares in Magnis closed down 6.9 per cent to 5.4c leaving the company with a $69.9m capitalisation.

Originally published as C4V claims Magnis launched illegal coup to seize control of battery factory IM3NY