Gordon Legal scopes out class action against Magnis amid concern over value destruction

Law firm Gordon Legal is exploring a class action that could target Magnis, its directors and its auditors Hall Chadwick.

Magnis chair Frank Poullas.

Gordon Legal have announced they are exploring a class action against ASX-listed battery and graphite player Magnis Energy Technologies.

The firm confirmed to The Australian it was investigating a class action which could target Magnis, as well as its directors and the company’s auditors Hall Chadwick.

Gordon Legal is understood to be assembling a class of current and former Magnis investors, many of whom lost money after investing in the company.

Shares in Magnis peaked at 73c in November 2021, with the company valued at more than $700m, but have since tumbled to just 4.2c with a market cap of just $43.34m.

This comes amid two investigations from the corporate regulator targeting Magnis and its chairman Frank Poullas.

Gordon Legal partner Andrew Grech said the firm was investigating Magnis “to get to the bottom of what’s actually occurred”.

“We’re at the beginning, not the end, of our investigations,” he said.

Gordon Legal is understood to be in close discussions with a litigation funder to back the case against Magnis, with investigations under way into the assets of the business, its directors, and auditors.

“The discussions with funders are proceeding as we would hope and like us they want to get to all the facts and circumstances before any decision is made,” Mr Grech said.

As revealed last Wednesday, Magnis has just $532,000 cash in the bank and has tapped lenders for a $4.6m lifeline.

Magnis also told investors it had plans to issue up to 300 million new shares in the business in a bid to raise funds.

Gordon Legal is understood to be concerned about Magnis directors providing market sensitive information to shareholders, while the market remained uninformed.

As revealed in The Australian, Magnis was stripped of control of iM3NY on December 6, but failed to inform the market of the move until December 18.

Mr Grech said the firm was looking at all the conduct that has taken place at Magnis over recent years, but would be limited to taking legal action for the period of 2021 and onwards.

“Our investigations are about the conduct of the directors, officers, and (Magnis’) auditors Hall Chadwick,” he said.

Hall Chadwick issued a going concern about Magnis in the company’s full year accounts in October, warning “there is material uncertainty that may cast significant doubt over whether the Group will continue to operate as a going concern”.

The auditor also warned it was unable to obtain sufficient evidence to issue an unqualified opinion about Magnis’ accounts, triggering the ASX to hold the company in trading suspension amid uncertainty over its financial future.

But Magnis returned to trade almost four weeks later after securing the approval of Hall Chadwick for a revised set of accounts.

Originally published as Gordon Legal scopes out class action against Magnis amid concern over value destruction