Space, communications and defence systems manufacturer Electro Optic Systems (EOS) has admitted breaching its continuous disclosure obligations by failing to disclose to the ASX a materially significant decline worth tens of millions of dollars in its 2022 annual revenue forecasts.
Between May and June 2022, EOS issued earnings guidance to the ASX that it expected its 2022 revenue to equal or exceed $212.3 million. By 25 July 2022, EOS became aware that its 2022 revenue was likely to be $164 million with a possibility of an additional $27 million. However, EOS did not disclose that information for 14 weeks, until 31 October 2022.
ASIC Chair Joe Longo said, “Providing accurate and timely earnings guidance to investors is a core obligation of listed entities and vital to properly informed decision-making in our public markets. EOS has accepted that it failed to correct its guidance when it became aware that its annual revenue forecast was overstated by tens of millions of dollars. Continuous disclosure of market-sensitive information is fundamental to upholding market integrity and supporting a fair and efficient financial system.”
ASIC and EOS will ask the Federal Court to impose a $4 million penalty, which reflects the seriousness of the contravention while considering EOS’s ongoing cooperation with ASIC’s investigation and its early admission of liability. The penalty is subject to consideration and approval by the Federal Court.
ASIC will seek declarations of contravention. It is a matter for the Court to determine whether the penalties are appropriate and to make other orders. ASIC has separately commenced proceedings against the former CEO and Director of EOS, Dr Ben Greene (25-288MR) for allegedly breaching his director’s duties.
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