Surfwear group Billabong is facing a major shareholder class action over the timing of earnings downgrades that sparked massive share price falls.
A Melbourne retail investor whose $30 million investment in Billabong halved in value in just over a month is leading the class action.
Newstart 123, the trustee of the Malone Family Superannuation fund, claims Billabong misrepresented its earnings forecasts and failed to disclose critical information to the market over the course of 2011.
“Billabong ought to have been aware that its systems were inadequate to enable it to assess and analyse the financial and operating performance of all parts of its global business,” Newstart 123 said in a statement of claim lodged in the Federal Court.
“Hence it had no ability to estimate accurately the likely earnings or earnings margins for full year 2012.”
Billabong said it “wholly rejects and intends to vigorously defend the claim”, which is being handled by law firm Slater and Gordon.
Shareholders who suffered losses during 2011, which could run into hundreds of millions of dollars, are able to join the class action.
Newstart’s claim focuses on several statements made by Billabong between February and December of 2011, a period of time in which the company’s share price fell from $8.51 to $1.70.
After forecasting a steady full year profit in February, Billabong downgraded its earnings forecast in August and again in December.
At the time of the first downgrade, then CEO, Derek O’Neill, allegedly told analysts he “did not even want to imagine scenarios in full year 2012 where earnings growth from full year 2011 could only be single digit or even negative”.
Had more information been disclosed to investors, the effect of downgrades on Billabong’s share price would have been different, the statement of claim says.
Billabong has made successive losses in recent years and turned down several takeover offers before reaching a deal with private equity firms to refinance the company in 2014.
Shares in the retailer dropped 0.5 cents to 60 cents.