Law firm Slater and Gordon is likely to lead a class action against Launceston-headquartered baby formula company Bellamy’s as stocks continue to drop for the once formidable business.
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International litigation group Bentham announced Slater and Gordon would likely conduct the class action in an announcement to the ASX on Monday.
“IMF Bentham Limited announces that is proposes to fund on a conditional basis claims of certain current and former shareholders of Bellamy’s Australia against Bellamys.
“The claims relate to alleged misleading or deceptive conduct and an alleged breach by Bellamy’s of its continuous disclosure obligations in connection with its trading prospects and future earnings performance during the period April 14 2016 and December 9 2016.”
The class action announcement follows a turbulent two months for Bellamy’s after shares fell more than 40 per cent in one day on December 2.
Bellamy’s stock fell from $12.00 to $6.56 and half a billion dollars was wiped from its revenue.
At 2pm on Monday, stock in Bellamy’s was sitting at $3.85 on the ASX.
In a statement to the ASX the company said a “temporary volume dislocation” in China due to regulatory changes had impacted the revenue and stock on hand.
It was reported in December the company could potentially face three class actions – from Slater and Gordon, Maurice and Blackburn and ACA Lawyers.
Slater and Gordon senior associate Mathew Chuk said investor disappointment about the revenue drop had been “pretty deep” and investors had already contacted the firm on the matter.
He said shareholders who had bought shares within the time frame listed could have a case against the baby formula company.
“The potential class action would make allegations that Bellamy’s engaged in misleading conduct regarding the regulatory changes in China and its benefit to the company.”
Mr Chuk said the class action would allege the company mislead its investors that the regulatory changes in China would positively benefit the company rather than the negative impact it did have.
In addition he said it would allege the company knew more about the potential drop in revenue from the regulatory changes ahead of time before the revenue fall sparked the share sell off on December 2.
Mr Chuk said the class action would investigation the conduct of the company prior to the pressure building now for a spill of the board.
Bellamy’s chief executive Laura McBain left the company in January and was replaced by chief operating officer Andrew Cohen.
Anyone who wishes to participate in the class action can contact Slater and Gordon.
A second class action conducted by Maurice Blackburn has also gained traction, with the legal firm announced it had secured benchmark funding with litigation funder ICP.
Maurice Blackburn principal Ben Slade said the second class action would create more competition in the litigation funding arena and would potentially see more money returned to clients.
“We have been working closely with ICP, which focuses solely on ASX shareholder claims and are confident that ICP’s benchmark rates on offer combined with a guaranteed safety net on the recovery upon success will give our clients greater returns and peace of mind.”
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