SurfStitch faces possible class action after profit downgrades
Law firm Gadens is conducting a preliminary investigation into the financials of SurfStitch following six months of turmoil for the publicly listed company.
On the back of the company’s third profit downgrade in six months last week, Gadens is inviting all current and past SurfStitch shareholders to register their interest in participating in a possible shareholder class action against SurfStitch and its directors.
“Gadens is particularly concerned to inquire about the initial float of SurfStitch in 2014 and the manner in which its affairs have been conducted since,” the law firm said the a statement.
“There are issues about the sufficiency of the disclosure made by SurfStitch at the time of the float and thereafter concerning its extensive business and brand acquisition program and the affect that program would have on its share price.”
The investigation will focus on reports that 30 private briefings were conducted with some shareholders between 25 and 29 April 2016, prior to the May 3 profit downgrade and whether SurfStitch complied with its continuous disclosure obligations and properly kept the market informed of matters affecting its share price or value.
Gadens will also examine the circumstances surrounding the deal which lead to a $20.3 million revenue shortfall announced last week, causing the company to forecast a loss for the 2016 financial year.
Gadens is also concerned about the bases on which the initial profit forecasts were made following the profit downgrades.
“SurfStitch shares floated at $1.00, rose to a high of $2.13 in November 2015 and have since declined to 33¢ on 10 June 2016. As a result the market value of SurfStitch stock has dropped by over $500 million,” Gadens said.
“The potential claims could be based on breaches of the corporations legislation, consumer protection legislation and continuous disclosure obligations. Compensation would be sought to redress loss suffered by shareholders.”