Magnis Energy Technologies requested a trading halt today. Despite not disclosing to shareholders, The Australian reports the company has been stripped of control of its iM3NY battery “gigafactory” by Atlas Credit Partners. Chair Frank Poullas as well as directors Claire Bibby and Giles Gunesekera have been removed from the iM3NY board.

C4V partnered with Magnis in 2017 to fund the iM3NY project and have alleged Magnis is insolvent and have refused efforts to recapitalise iM3NY. C4V’s court documents claim iM3NY will run out of cash by January 2024.

Contrast this with the rosy picture Magnis’ management have previously painted to shareholders. Statements from Poullas and others have suggested a possible worth of $4Bn for iM3NY and projected revenues of $1.7Bn by 2027. It appears after all the money Magnis have invested into the construction of the iM3NY plant they’ll have nothing to show for it.

In addition to questions around the company’s solvency, ASIC launched an investigation in July into the company’s market disclosures and conduct, scrutinizing potential false or misleading statements and breaches of continuous disclosure obligations.

It looks like this is the end for MNS.

Concerns and red flags with Magnis Energy Technologies have grown exponentially.

Over promotional management

Zero receipts from customers

Transactions with key management personnel/related party transactions

In addition to the above,

The CEO resigned in June

2 days ago the ASX suspends them for not lodging their Full Year Accounts on time

MNS lodges their Full Year Accounts and they’re not pretty (notes below)

ASX continues to suspend MNS over concerns with the qualified audit opinion

Total income for the year of $390,773;

Comprising interest, foreign exchange gain, sale of fixed assets, the black box “other revenue”; with no note to explain what it consists of, and no real sales

Expenses of $73M

Net loss of $72.7M

Over $150M in debt

Net Assets -$1.2M

Equity -$1.2M

D/E ratio of -125

A negative D/E ratio is considered a high risk of bankruptcy¹

Operational cash outflow of $58.7M

Free cash flow of -$93M

Zero receipts from customers

Less than 2 quarters of funding available

Fit out of iM3NY plant apparently complete with sales delays being attributed to over demand on resources and delays in certification of their batteries

Another big red flag is the number of subsidiaries. MNS and the below subsidiaries have elected to form a tax consolidated group.

The number of subsidiaries and an inability to understand or see all the moving parts of all the financial statements is enough to put this one in the too hard basket for me.

Good luck to those holding.

1 https://www.investopedia.com/terms/d/debtequityratio.asp

CEO Resigns

The company announced CEO David Taylor has resigned. His tenure commenced August 1, 2022 so he lasted almost 12 months.

Contemporary Amperex Technology Co. Ltd. CATL is the largest EV battery producer in the world.

“It has been looking at plans to build future battery factories at a minimum of two locations in Mexico, which are both very near the Texas border. The company is also considering locations in the US. The battery maker has been checking out the locations and attempting to finalize negotiations and decisions to pave the way for a major announcement in the near future. CATL is considering building a battery factory in the US or Mexico to supply EV batteries for Tesla and Ford.”

https://insideevs.com/news/602248/china-catl-delays-us-battery-plant-news-pelosi-taiwan/ 

Tesla Extends Battery Supply Deal With CATL To December 2025

“We guess that CATL will continue to supply Tesla with LFP batteries - for the MIC Model 3 Standard Range Plus, probably soon also for the entry-level MIC Model Y, and maybe for an all-new, entry-level electric car. There is also a chance that CATL's LFP chemistry would be used in Tesla's new 4680 cylindrical cells.”

https://insideevs.com/news/516923/tesla-extends-supply-catl-2025/

Magnis Energy claims their C4V battery technology has a denser energy to weight ratio than a standard LFP battery. This should give them a competitive edge if it can break into this lucrative market. As an Australian owned company with a factory in the US, this should also be an advantage from a National Security perspective, particularly given the current political tensions between the US and China.

As @slymeat flagged a couple of weeks ago the iM3NY plant is up and running and looking to get straight into things. Market announcement today and all of a sudden people like the story 30% more than they did yesterday.

Held IRL

Sold my holding (both in Strawman and real).

I still hope this company can execute, and the demand from the market is clear, but there are now too many red flags for me.

The news reports about the ASIC investigation are unsubstantiated, and being under investigation doesn't imply wrong doing, but the big run up in price was odd.

This is combined with the rather promotional nature of some of their market announcements, plus directors being issued performance rights for hitting a $500M market cap (from my understanding of the ASX announcements).

Too many, so I'm out.

The Director that is head of the Audit and Risk Committee at Magnis resigned "abruptly" according to this article in the Daily Telegraph.

"Another Magnis director jumps ship

Tensions among Magnis Energy directors have spilt into public view after the company’s audit and risk committee chairman abruptly quit the hi-tech batteries player." - Daily Telegraph

This short video on ShareCafe is an interview withFrank Poullas, Chairman of Magnis. The video is undated but appears to be recorded early August 2021. It doesn’t cover anything new but rounds up some recent news from the last six months regarding the New York lithium ion battery plant

The New York battery plant is owned by iM3NY, and Magnis is majority shareholder with ~65% ownership. My view is that this is by far the most promising part of the Magnis story.

My notes from the video:

A$20 million Investment
Frank Poullas discusses investment from US based investors and the plan to list iM3 in New York. He expects this will offer greater valuation on the road to double digit GWh production.

Binding offtake
‘Semi-autonomous’ production by the end of they which should give “semi-serious production numbers”. Fully automated production by April 2022. Magnis have announced binding sales agreements of $A1 billion.

Additional funding
Exploring additional funding options to accelerate growth.

Product application
Batteries are intended for grid storage and electric vehicles. Apparently in discussion with well known players in both markets.

To view the video go to  https://www.sharecafe.com.au/videos/ and look for “Big Week for Magnis Charges the Company Battery”

(I hold)

Equipment purchase reduces overall capex and fast tracks production at the New York Battery Plant

• Machinery acquired from lithium Machinery acquired from lithium Machinery acquired from lithium-ion cell manufacturer A123 Systems and ion cell manufacturer A123 Systems and ion cell manufacturer A123 Systems and is being is being is being relocated from Michigan to Huron Campus relocated from Michigan to Huron Campus relocated from Michigan to Huron Campus
• iM3NY now has the ability to produce 20 and 50amp has the ability to produce 20 and 50amp has the ability to produce 20 and 50amp hour cells to cover all major hour cells to cover all major hour cells to cover all major markets markets marketsfor lithium for lithium for lithium-ion batteries ion batteries ion batteries
•  First production on track for late 2021 First production on track for late 2021