LAW FIRM Slater & Gordon filed the first class action against Australia’s largest telco Telstra late last week on behalf of shareholders who allege the company failed to disclose its true financial position.
The plaintiff law firm commenced the action against Telstra in the Federal Court of Australia for shareholders who claim they paid inflated prices for the company’s shares because it hid important financial information about its future earnings and past investments to the Australian Stock Exchange (ASX).
Slater & Gordon’s Joanne Rees said investors had contacted the law firm angry that the telco had given information to the federal government but hadn’t released it to the market. “The law is very clear, these details should have been released as soon as Telstra became aware of them,” said Rees.
“We had mum and dad investors who had invested superannuation funds on the basis that they could trust what Telstra was saying about its performance,” Rees told Lawyers Weekly.
Despite there being no public notification, about 50 shareholders have contacted the law firm, angry at Telstra’s “behaviour”, said the firm. It said last week that when the Court defines the terms of the class, any investor who purchase shares between the relevant dates is able to join the case, adding that this could be several thousand.
The firm said that in the statement of claim, it is alleged that on 11 August last year the company gave a private briefing to senior federal ministers in which it forecast a drop in future earnings. As well, it revealed a $3 billion underspend on operating and capital expenditure in the previous three to five years.
This information was not revealed to the market until 7 September when Telstra released a copy of the government briefing to the ASX. The law firm noted that the company’s inaction in revealing the information to the market was in breach of the ASX Listing Rules and the Corporations Act 2001.
“We know Telstra held onto the information for about a month, between telling the government in August and the Stock Exchange in September,” said Rees from Slater & Gordon.
“How long before August they actually knew about the changes in market disclosed information we are yet to discover,” she said. “Had Telstra disclosed this information immediately it is likely the share price would have fallen significantly.”
Investors now want to claim compensation for the difference between the price they paid and the value of the shares if the market had known all the details, Rees added.
This is not the first significant class action case Slater & Gordon has taken in recent years. Principal actions have included fighting for compensation for the James Hardie asbestos victims, as well as legal proceedings on behalf of McCabe against British American Tobacco. As well, said Rees, “there was the helping the hundreds of businesses that suffered financial loss following the contamination of Sydney’s water in 1998”.