In a significant legal battle, The a2 Milk Company Limited (a2) is facing a consolidated class action led by law firms Slater and Gordon and Shine Lawyers, representing thousands of shareholders seeking compensation for financial losses. The case, which has been ongoing since 2021, centers on allegations of misleading conduct and breaches of corporate disclosure obligations.
Table of Contents
The Background of the Class Action
The class action was initially launched in two separate proceedings:
- Slater and Gordon, acting on behalf of the Thomas lead plaintiff, filed the first claim on 5 October 2021.
- Shine Lawyers, representing the Xiao lead plaintiff, filed a second claim on 23 November 2021.
Both proceedings were merged into a single Consolidated Proceeding by the Supreme Court of Victoria on 2 June 2022. Since then, the two firms have been working jointly to pursue justice for affected shareholders.
Who is Eligible to Join the Action?
The class action targets shareholders who purchased or held a2 shares during specific periods:
- Primary Group: Shareholders who acquired a2 shares between 19 August 2020 and 9 May 2021.
- Extended Group: Shareholders who purchased a2 shares prior to 19 August 2020 and continued holding them past 28 September 2020.
The Allegations Against a2 Milk
The legal team alleges that a2 Milk engaged in misleading or deceptive conduct and failed to meet its obligations under the Corporations Act 2001 (Cth) by:
- Issuing Unrealistic FY21 Guidance
On 19 August 2020, a2 projected:- Strong revenue growth driven by marketing investments.
- An anticipated FY21 EBITDA margin of 30%-31%.
- Price discounting to boost sales in the cross-border e-commerce channel.
- Disruptions in the daigou/reseller channel, which weakened consumer demand and marketing efforts.
- Failing to Adjust Guidance Despite Declining Performance
The company is accused of maintaining its optimistic guidance despite mounting evidence that financial targets were unachievable. A series of revenue downgrades followed:- 28 September 2020: Revenue estimate lowered to $1.80-$1.90 billion.
- 18 December 2020: Revised revenue forecast to $1.40-$1.55 billion.
- 25 February 2021: Revenue projection reduced to $1.40 billion.
- 10 May 2021: Final revenue downgrade to $1.2-$1.25 billion, with EBITDA margins dropping to just 11%-12%.
These downward revisions caused significant losses to shareholders.
- Breach of Continuous Disclosure Obligations
Slater and Gordon argue that a2 Milk failed to promptly disclose information about the challenges affecting its performance, violating its obligation to provide continuous and timely updates to investors.
Key Legal Developments: Group Costs Order (GCO)
On 20 December 2023, the Supreme Court of Victoria approved a Group Costs Order (GCO), allowing legal costs to be calculated as a percentage (24%) of any settlement or award. Importantly, the GCO ensures that participants in the class action face no out-of-pocket costs, even if the case is unsuccessful.
Slater and Gordon and Shine Lawyers will absorb the risk of paying a2 Milk’s legal costs should the claim fail, making it risk-free for shareholders to participate.
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How to Register for the Class Action
Eligible shareholders can register their interest online through Shine Lawyers’ platform or by contacting the legal team via [email protected]. Registration ensures participants receive updates on the case’s progress.
Eligibility Criteria:
- Purchased a2 shares between 19 August 2020 and 9 May 2021.
- Held a2 shares prior to 19 August 2020 and continued holding them past 28 September 2020.
What’s at Stake?
The case represents a pivotal moment for corporate accountability in Australia. If successful, it could result in substantial compensation for affected shareholders and highlight the importance of accurate financial reporting.
Stay tuned for updates as this high-profile class action progresses.
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