Slater & Gordon said it would seek compensation on behalf of Australian and international investors who are contending that Billabong engaged in misleading and deceptive conduct and failed to comply with its continuous disclosure obligations.
Slater & Gordon senior associate Odette McDonald said the class action will argue that Billabong gave earnings guidance to investors for the financial year 2012 that lacked reasonable grounds.
“Our clients allege that Billabong misrepresented the assumptions on which its FY12 earnings growth guidance was based,” McDonald said.
The firm alleges that on 19 August 2011, Billabong forecast that it would achieve strong earnings growth in financial year 2012.
However, a few months later, the board of the company withdrew that guidance and revealed that its earnings would suffer a substantial fall. As a result, Billabong’s share price dropped from $3.64 immediately prior to the disclosure to $1.77 on 20 December 2011, a fall of about 51%.
“The company stated that achieving guidance depended on internal initiatives, such as achieving synergies between its newly-acquired retail outlets, and increasing the proportion of total revenue from Billabong product," McDonald said.
"However, it is alleged that, in reality, Billabong’s growth guidance required an extraordinary lift in overall sales revenue during an extremely challenging retail environment.”
Slater & Gordon said its clients will argue that Billabong’s internal initiatives had no viable chance of substantially increasing profit margins, contrary to what the company had conditioned investors for.
It will also contend that, had the market been informed of the true dependencies underpinning the earnings forecast, it would have disregarded the guidance as unrealistic, and this would have been reflected in Billabong’s share price.
Billabong has been contacted for comment by Australasian Lawyer
Comprehensive Legal Funding is putting money behind a Slater & Gordon class action which the firm announced yesterday it would ready for "hundreds" of investors in surfwear brand Billabong.