Clock ticking as Magnis runs out of money

Magnis Energy Technologies will be hit with a $4.6m cash call on Friday after big spending on its battery gigafactory in New York and litigation against critics.

Long-serving Magnis chairman Frank Poullas took issue with posts about him on the HotCopper website. Picture: James Croucher

Magnis Energy Technologies is on borrowed time.

The former ASX market darling will be hit with a $4.6m call on Friday after big spending on its battery gigafactory in New York and litigation against critics.

Magnis needs cash, with its latest accounts revealing it has just $532,000 left after burning through $19.1m in the six months to December 31. A chunk has been spent on corporate costs and investments in its ill-fated Imperium3 NY gigafactory. That followed $73m of spending in the last year, including $4.4m on legal and consulting expenses.

The cash crunch is now so severe Magnis was forced to tap lenders for a $4.6m short-term lifeline, charged at 5 per cent a month, falling due on March 1.

Magnis’s search for money comes as the company also seeks to refinance a $US100m ($147m) loan on its battery factory, with the company revealing two weeks ago it was “working closely” on a potential debt deal.

Magnis is targeting securing term sheets from investors, after meeting multiple “institutional” parties who were in “detailed diligence”, with the company presenting plans to commercialise its gigafactory.

But as Magnis faces the potential of a class action over eroded shareholder value, investors are concerned the company has ploughed funds into pursuing critics and failed to ensure the delivery of promised investments.

Documents seen by The Australian show how Magnis instructed lawyers to chase down the identities of critics who took aim at pledges by the company and its longtime chair Frank Poullas, often demanding cash settlements and online apologies.

The online musings of Magnis supporters also raise questions about how information has been shared among the tight coterie of supporters, who appear to be well informed about market-sensitive details well before their disclosure. The battery and graphite player, worth as much as $700m at its peak, is now worth a little over $50m, but investors are unlikely to extract themselves from investments any time soon after the ASX pulled Magnis from trade in early December, citing a failure to provide the market with critical information.

The Magnis iM3NY plant.

Magnis is now facing a potential class action from litigation specialists Gordon Legal, who are scoping out a case against the company’s board and auditors Hall Chadwick, who signed off the company’s accounts just days before the lenders on its gigafactory stepped in amid a litany of loan breaches.

The Australian Securities & Investments Commission is also well advanced with its investigation into the company’s market disclosures, as the regulator ­investigates “suspected false or misleading statements and breaches of continuous disclosure obligations by Magnis”.

Magnis’s tech partners Charge CCCV have even warned the company is “effectively insolvent” in a court battle over allegedly illegal manoeuvres to seize control of their joint venture.

With repayments on its new loan averaging $230,000 a month, Magnis is watching the clock, with the company offering investors assurances it was “ in late stages of negotiations with several potential cornerstone investors with a significant investment expected to be finalised during the current quarter”.

This comes after Magnis was forced to reveal iM3NY had failed to make any batteries in December or deliver any sales, despite earlier assurances to the market.

The normally exuberant company has also adopted a muted tone in recent months, after The Australian revealed its gigafactory iM3NY had been seized by lenders after the Magnis-controlled manufacturer defaulted on its $US100m ($147m) loan with Atlas Credit Partners.

Instead of being treated to a steady stream of market updates spruiking Magnis’ investments in iM3NY or its graphite mine in Nachu, investors are now met with silence with one day to go until Magnis’s lifeline runs out.

But some of Magnis’ loudest critics have been cowed, after the company successfully forced the operator of stock speculation forum HotCopper to reveal the identities of a number of accounts that had criticised the company and its long serving chair Frank Poullas.

Christien Corns, a partner at Magnis’s lawyers, K&L Gates, sent legal threats to a number of these accounts, taking issue with posts concerning Mr Poullas that made the chair appear to be a “liar who portrays the business of a listed company of which he is executive chairman as successful, when it is in fact unprofitable and un­successful”.

Mr Corns also sought to claim Magnis’s reputation had been attacked, claiming the posts suggested it was “scam company” and that “it defrauds investors”. Mr Corns demanded several of these accounts make a public apology to Mr Poullas and Magnis, despite many of their posts coming years before the court action, in a move what the company told The Australian was aimed at “correcting misinformation, and to open the door to a robust and productive two-way conversation”.

“We believe it was a productive outcome,” a spokeswoman said.

The Imperium3 New York failed to produce any batteries in December 2023.

Lawyers for one investor threatened by Magnis pushed back on the claims, also questioning whether the company had leaked sensitive information to supporters of the energy company, exposing their identities in a breach of court rules.

Accounts linked to Magnis supporters started making posts concerning some of those who faced legal action in the days after details were handed over by HotCopper. One account posting under the name “Padmore” referred to one person hit by Magnis’s court orders as a “blowass who is a wannabe hotshot”.

HotCopper user Padmore, understood to be a key shareholder, is among several on the radar of ASIC as the regulator looks at Magnis’s supporters.

Major shareholder and Gladiator Resources director Matthew Boysen has previously noted “key shareholders” have benefited from investments in companies, which The Australian has learned received undisclosed support from Magnis.

When The Australian sought to speak with Mr Boysen, who previously attempted to assault this journalist at a Magnis annual general meeting, he said: “If you ever contact me again I will be contacting the police to make a complaint for harassment.”

ASIC previously probed the use of HotCopper by Mr Poullas, as part of an earlier investigation into the Magnis chair, which saw the regulator raid his house and seize computers.

ASIC told a Senate inquiry its investigations found a number of communications which “contained general commentary about what the company is doing and generally promoted buying Magnis shares”.

“To the extent that any information was later announced to the market, it did not appear to generate any significant market reaction,” ASIC noted.

But several online boosters of Magnis appear well informed as to market movements weeks before their announcement.

One X user, posting under the name “Bexley Ray”, questioned on December 16 “why IM3 has not sold any batteries yet”, noting the boss of Magnis’ key technology, Charge CCCV chair Shailesh Upreti, failed “to commercialze (sic) his technology”.

“Also ask him why he didn’t get 2 or 3 companies to do the certification concurrently,” Ray said.

When questioned on how he had knowledge of key operations at Magnis’ battery factory Ray told this publication “everyone knows you are a dope”.

This came in the wake of assurances from Magnis to shareholders its battery gigafactory Imperium3 New York would be spinning out 300 cells a day, with sales locked in from offtake customers.

Magnis managing director (US) Hoshi Daruwalla told shareholders at the company’s annual general meeting on November 30 iM3 would soon scale to produce and sell 1000 cells a day.

But Magnis later told investors on January 10 it had “since been informed by the new board of Inc that this is not the case and that there was no production in December 2023, nor any revenue generated in that month”.

Ray chimed in on January 10, telling The Australian “did I not tell you 4 weeks ago Sahilesh would not be producing any batteries. You had to wait till now to work that out? Worst reporter ever.”

Magnis has been repeatedly pinged over failures to notify the market, with the ASX pulling the company from trade after it waited days to reveal the lenders had stripped it of control of iM3NY.

“Magnis was not aware of any delays in production until it was informed by the new board of this earlier this month,” a spokeswoman said.

“Once it became aware, it informed the market in line with its ASX reporting obligations.”

Originally published as Clock ticking as Magnis runs out of money