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$300m class action launched against ASX-listed company

$300m class action launched against ASX-listed company

Scales of Justice

A global law firm issued a class action in the Federal Court last week, seeking damages for investors of a listed enterprise for “overhyped” announcements.

Squire Patton Boggs brought action on an open basis on behalf of Dwayne Perera and other investors in GetSwift (GSW) and the company’s director, Joel MacDonald, for engaging in misleading and deceptive conduct in trade, and for compensation for failure to comply with continuous disclosure obligations as per ASX listing rules and the Corporations Act.

The firm estimated the total damages sought could exceed $300 million.

The action was commenced on the basis that there were material non-disclosures by GSW, and that the market was not informed of client cancellations of arrangements following short trial periods.

As a result, the applicant submitted that announcements made by GSW may have misled investors into believing that revenue was, or would, be generated from contracts with clients such as CBA, The Fruit Box and Fantastic Furniture.

Following an internal review of compliance issues – with assistance from PricewaterhouseCoopers – GSW admitted last Monday to the ASX that only 50 per cent of its announced enterprise client contracts were at the revenue generation phase.

In a statement, Squire said: “We are presently unsure as to what that means in respect of the remainder of the 50 per cent of enterprise clients and the implications for its business going forward.”

“The company indicated that it is now in compliance with the listing rules although it appears that an announcement in respect of the remaining 50 per cent of enterprise clients who are not in the revenue generation phase may be necessary.”

Over the course of 2017, GSW made announcements to the ASX about contracts with CBA, Fruit Box and Fantastic Furniture, and also proffered that “transformative and game-changing partnerships are expected and will be announced only when they are executed, secure and quantifiable”.

In addition, the company assured the market it would “stand behind this policy of quantifiable non-hype-driven announcements even if it results in negative short-term perceptions”.

The consequence of such announcements, the applicant submits, was assurance to the market about the contracts, and ensuing revenue.

It wasn’t until late January 2018 that GSW announced to the ASX that Fruit Box had sought release from their contract, and that Fantastic Furniture was also not proceeding, both of which were inconsistent with the previous representations of “no hype”, and that GSW would only announce “secure and quantifiable contracts”.

The applicant is claiming that the exaggerated announcements made by GSW gave rise to a belief among investors that the company had actually secured and commenced generating revenue from those clients.

Following the announcements in question, GetSwift shares increased to a peak price of $4.60, with a market capitalisation of $598 million.

After it was revealed certain contracts didn’t survive the trial period, market capitalisation shrunk to less than half at $246 million, with shares at $1.34.

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