Issue #39 | Reality Check

ASX - Top 3 Winners & Losers
Deals Down Under - Firmus fumbles IPO
Global Markets - French bonds
Other News - Aussie Politics, Sport and Culture

The ASX 200 rose 0.4% this week, a second straight weekly gain, as tech stocks rebounded despite growing questions over whether AI revenue is growing fast enough to justify the capital going into AI infrastructure. Uranium and lithium stocks slumped over the week, while telcos fell after SpaceX announced a major spectrum deal. 

This week’s best performers

Arena REIT (ASX:ARF) +16.34%
A buyer for much of tenant Edge Early Learning’s business lifted Arena REIT, the property trust that owns early learning centres, 16.34%. Edge is in administration, meaning an outside manager is selling or rescuing it, and Goodstart Early Learning has conditionally agreed to buy Edge businesses covering 20 of the 27 Arena-owned centres, which keeps rent flowing to the landlord. The other seven sit in a separate sale, and the deal still needs Arena’s consent, with the stock down 38% over 12 months. 

Domino’s (ASX:DMP) +12.35%
Domino’s Pizza Enterprises, the master franchisor behind the brand in Australia, Europe and Asia, rose 12.35% after a board member bought more shares on market. That doesn’t prove a recovery, but the turnaround is under a new chief executive from a global burger chain, and free cash flow improved despite July’s asset writedowns and store closures. The test is whether sales at existing stores turn up.

The Lottery Corporation (ASX:TLC) +6.79%
There was no fresh announcement behind the 6.79% rise in The Lottery Corporation, the operator of Powerball, Saturday Lotto and Keno, so August’s full-year result is the best guide. Revenue fell 2.7% to $3.58bn and profit before one-off items fell 6.3% to $342.5m after a rare drought of big jackpots hurt ticket sales. The dividend was held at 16.5c, but that was 107% of profit, and debt is set to climb after a $1.145bn payment to extend its Victorian licence. 

This week’s worst performers

Vulcan Energy Resources (ASX:VUL) -17.92%
Vulcan Energy Resources, the developer of a zero-carbon lithium project in Germany, fell 17.92% as the lithium sell-off kept running. The shares hit a six-year closing low and are now the most oversold stock on the ASX, so a bounce is possible. But Vulcan has little revenue yet, its €50.4m half-year loss is up from €30.7m, and weak lithium prices and high interest rates shrink what its future cash flows are worth today. 

Megaport (ASX:MP1) -15.94%
Megaport, the network provider that connects businesses to cloud and data centres, fell 15.94% with no new news behind it, after being one of the best performers last week. It was giving back that 13.86% jump on three AI-infrastructure contracts worth US$978.6m, and a sell-off after a spike that big is common as some holders take profits (sell to lock in a gain). The contracts and lifted FY27 revenue guidance haven’t changed, but the wide $720m to $810m range leaves how much lands in FY27 an open question.  

DroneShield (ASX:DRO) -14.25%
DroneShield, the counter-drone technology maker, fell 14.25% to $1.67, well below its 52-week high of $6.70. No single announcement stands out, but short sellers (traders betting the price will fall) hold 15.2% of the company and ASIC is still investigating its November 2025 ASX announcements. September’s place on a US$500m US homeland defence contract helps, but it isn’t guaranteed revenue. 

Firmus Technologies has pulled its IPO, abandoning what would have been the biggest ASX listing since Telstra in 1997. The $44bn float was meant to raise US$5.5bn at $11 a share to fund its data centre buildout across Asia and Australia.

The deal unravelled in less than a week. On Monday, US banks JPMorgan, Bank of America and Morgan Stanley, alongside local broker Morgans, told fund managers bids were well in excess of the shares on offer. By Thursday the book had closed short, with the large US investors expected to anchor the deal failing to show. Repricing talks slid from $11 towards $8 and below before Firmus walked away on Friday. Investors walked away for five reasons:

The blame is now landing on the bankers, who stood to earn about $215m in fees. Longstanding backer David Paradice said his firm had been told of massive US bids “which clearly never eventuated”, and commentators are calling on ASIC to examine the brokers’ messaging. The damage has already spread to the ASX, with contractor Maas Group, a major Firmus shareholder, shedding $550m in value on Thursday.

The bigger cost may fall on Firmus’ founders. Under deal protection clauses agreed in July with US chipmaker Nvidia, private equity giant Blackstone and other backers, missing a November 30 listing deadline hands those investors extra shares the longer the delay runs, diluting founders and early investors.

Firmus will now seek private funding and pursue a Nasdaq listing. Last week its CFO called a US listing “something that we’d be thinking about”. This week it became the plan.

French government bonds are normally one of the quietest corners of the market. France is the eurozone’s second-largest economy, and investors have long treated its debt as a safe place to park savings. This week that changed, and the selling is spreading.

France’s 10-year yield (the rate the government pays to borrow for a decade, which rises when bond prices fall) jumped 12 basis points, or 0.12 percentage points, to 4.87%, a level not seen in about 25 years. The extra yield investors now demand to hold French bonds over German ones, a gauge of how risky France looks, is 136 basis points, near its widest since 2012. The euro also fell to a 17-month low. 

The cause is a budget stand-off. France’s deficit is above 5% of GDP, well over the EU’s 3% limit, and a divided parliament has no plan to shrink it. Protesters want more spending while bond markets want less, and April’s presidential election adds to the unease, with a runoff between Marine Le Pen and the hard-left Jean-Luc Mélenchon now looking possible.

For Australia, NSW, Queensland and Victoria bonds have been the hardest hit, with yields up to 7 basis points wider than federal bonds. The federal budget looks better placed, with a deficit under 1% of GDP. The Australian dollar hit 62.31 euro cents, its highest since late 2024, as the RBA’s 4.6% cash rate sits above the European Central Bank’s 2.5%. One strategist sees a silver lining, since governments globally cutting back on spending could ease inflation and let the RBA cut rates without causing a downturn. 

Whether Australia stays insulated is still up for debate. The bond market tends to keep rotating its attention, and the US 30-year yield hit a 24-year high this week. If the selling moves to bigger markets, Australia’s clean books may not count for as much as the RBA would like.

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