Magnis Energy Technologies Ltd has been significantly impacted after lenders took control of its major project, the Imperium3 New York (iM3NY) battery 'gigafactory'. Court documents from the Delaware Chancery courts indicate Magnis acknowledged the shift in control to lenders but the company did not disclose this change to the markets.
Instead, Magnis issued statements implying that the lenders, who provided a $100 million intellectual property-backed loan to iM3NY, aimed to alter the board’s composition and assume control of its operations. However, the lender in question, Atlas Credit Partners, has effectively removed Magnis's control over the iM3NY board, replacing all but one of the directors with its appointees.
The only remaining director from Magnis is Shailesh Upreti of Charge CCCV, currently embroiled in a legal dispute with Magnis. Magnis' chair Frank Poullas along with directors Claire Bibby and Giles Gunesekera have been removed from the board.
Magnis, which has traded on the ASX since 2005, has been focusing on building a network of battery factories. The iM3NY project, which began in May 2017 in partnership with C4V, was a cornerstone of this vision. Despite significant investment, with projected revenues of $1.8 billion by 2027, the recent court filings suggest that Magnis subsidiary iM3NY no longer controls its primary asset.
The internal struggle with C4V over iM3NY's control has escalated with Magnis warning of potentially ruinous consequences. A legal battle was sparked in November following a controversial board meeting. Steven Caponi, a partner at K&L Gates and legal representative for Magnis, expressed concerns about the costly nature of this dispute, emphasising the urgency of resolving the matter.
The recent developments have raised questions about Magnis' solvency without iM3NY. C4V has alleged that Magnis is effectively insolvent and has resisted efforts to recapitalise iM3NY. Despite these challenges, Magnis North American managing director Hoshi Daruwalla highlighted ongoing sales targets for iM3NY.
C4V's documents suggest a dire financial situation for iM3NY, with potential cash depletion by mid-January 2024. Magnis's refusal to engage in financing discussions and the lack of an alternative proposal have exacerbated the situation.
These events coincide with an investigation launched by ASIC in July into Magnis’s market conduct and disclosures. ASIC is scrutinising potential false or misleading statements and breaches of continuous disclosure obligations, and in recent weeks has called on Magnis to hand over documents.
Shares in Magnis have dropped more than 13% since the revelation of the latest loan breaches last Friday. The company is currently in a trading halt, needing “time to prepare a disclosure in relation to iM3NY Credit Facility”.