Legal firm prepares to hit Magnis with demands on behalf of investors who lost millions

Class action lawyers are preparing to issue Magnis and its auditors with a letter of demands over millions of dollars lost by investors.

Magnis Energy Technologies chair Frank Poullas. Picture: Britta Campion

Class action lawyers are preparing to serve the board and auditors of Magnis Energy Technologies with letters of demands, asking that shareholders who lost millions of dollars on the battery and graphite company be remediated.

Gordon Legal, which has been exploring a case against Magnis, has concluded its initial investigations into the company amid concerns its directors may have caused investors to experience financial loss.

The Melbourne law firm is expected to contact Magnis in days as it prepares to issue court proceedings against the ASX-listed company and its auditor, Hall Chadwick.

Gordon Legal partner Andrew Grech said the firm had decided to proceed against Magnis on behalf of aggrieved shareholders, noting the firm was deeply troubled by recent moves at the company.

Shares in Magnis have plummeted from their highs in late 2021 when the company was valued at more than $700m, to just $40m when Magnis last traded more than 130 days ago.

Magnis was suspended from trading on the ASX in early December.

Mr Grech said the firm had “satisfied ourselves that there is a proper basis to commence proceedings against Magnis and their auditors Hall Chadwick”.

“We will be reaching out to both those parties soon to explain why we think they have liability for the losses suffered and inviting them to sit down and see if the concerns of shareholders can be resolved,” he said.

“If they can’t be then our advice will be to issue proceedings.”

Hall Chadwick signed off Magnis’ full year statutory accounts in October, noting the company was in “compliance” with covenants on a $US100m ($147m) loan just days before a round of breaches were issued by the lender, including allegations of millions of dollars in unpaid interest bills.

The potential class action comes as Magnis faces an investigation by the Australian Securities and Investments Commission over its market conduct. The corporate regulator is concerned that the listed company may have market disclosure rules and allegedly published suspected false or misleading statements.

As revealed in The Australian, Magnis has repeatedly failed to tell investors about major movements at the company, including the loss of control of its major American battery factory asset.

The company has repeatedly been reprimanded by the ASX, which recently said that it was concerned Magnis had failed to show it was appropriate to continue to be listed and had repeatedly failed to abide by market disclosure rules.

This included Magnis’ failure to tell shareholders that it had taken out a $4.6m loan, charged at 60 per cent a year, for several months.

Records show a new loan was recently secured against Magnis by stockbroker and capital markets firm GBA Capital.

This came after a company linked to Koa Capital, a Sydney-based lender, registered a loan against Magnis late last year despite different debt deals signed by Magnis preventing it from taking on new debts secured against its American battery factory assets.

Mr Grech said he was “deeply troubled” by the recent financing moves from Magnis, and that if loans had been taken on by the company while it was insolvent these would be “easy to unpick” but could leave directors liable.

“We’re always hopeful that common sense will prevail,” he said.

Originally published as Legal firm prepares to hit Magnis with demands on behalf of investors who lost millions