Shareholders could bring a class action against A2 Milk with Shine Lawyers alleging they were misled by the company about the strength of its future baby formula sales.
The firm has launched an investigation on behalf of investors who purchased shares between 19 August 2020 and 7 May 2021.
A2 Milk had predicted its baby formula would fly off the shelves in the 2021 financial year, contributing to a 30 per cent boost to its earnings before interest, taxes, depreciation, and amortisation.
But the rosy forecast turned sour with the company reporting earnings 20 per cent lower than expected, resulting in a 62 per cent drop in the share price.
Class Actions Practice Leader at Shine Lawyers, Craig Allsopp, said A2 Milk may have breached the Corporations Act by engaging in misleading and deceptive conduct.
“We believe A2 Milk did not have a reasonable basis for its sales forecast and knew or ought to have known its predicted profit margins were not going to be realised,” he said.
Mr Allsop said the company is also alleged to have breached continuous disclosure obligations by failing to inform shareholders of its future trade plans.
“A2 Milk tried to boost sales by promoting its English label baby formula online but this backfired by causing a decline in sales among Daigou or Chinese consumers in Australia who buy the product in stores and mail it to family overseas,” he said.
“Investors deserve to be compensated for their losses given we say the company’s conduct is to blame.”
Shareholders are encouraged to register their interest in this class action on our website.