Law firm Shine Lawyers has recently launched an investigation into A2 on behalf of investors who bought shares between August 2020 and May 2021 and suffered major losses.
It comes after rival firm Slater & Gordon filed proceedings against the company in Australia’s Supreme Court of Victoria earlier this month on behalf of investors who bought shares during the same nine-month window.
During the period, the company downgraded its earnings guidance four times, as closed borders and excess product supply disrupted sales to its biggest market China.
Shine Lawyers class action practice leader Craig Allsopp said the company may have deceived or misled investors about its financial position in those market updates.
“Well A2 Milk provided very upbeat guidance to shareholders in August and September last year and [then] issued not just one, but three downgrades to its guidance.
“There’s information to suggest that A2 was or should have been aware that it did not have a reasonable basis for its original guidance in the first place.
He said A2 Milk’s sales were strongly dependent on what are known as daigou sales channel.
The daigou channel is an unofficial trade route whereby Chinese tourists and students in Australia snap up large amounts of products from companies like A2 and then resell them to friends and family back home on the mainland.
“A2 had planned to grow other sales channels into China and the end result was that they brought too much inventory into the market, it turned the daigou off, which in turn impacted their online sales.”
Allsopp said its investigation was focused on determining if A2 should have known what difficulty this strategy would create for them.
However, the basis of its investigation is near identical to the grounds of the case filed by Slater & Gordon.
Allsopp said it was not uncommon to have rival class action cases in Australia at the moment.
He was confident that if it proceeded with a case it could deliver better returns to investors who joined the class action.
“We are very familiar with A2 milk’s defense team, having come up again the same team on out other shareholder class actions.
“We’re looking to run it tightly on cost and [are] completely focused on maximising returns to shareholders if we are successful.”
Allsopp would not disclose how many investors had joined the investigation but he expected it would be thousands.
He could not put a cost how much money it was seeking.
Shine Lawyers operates on a no-win, no-fee basis.
Allsopp would not disclose the firm’s professional fee or its budget, as it would give away too much information to the other side of a potential case.
The investigation is being carried out as a priority and an announcement would be made in a matter of weeks about whether a case would be brought against A2, he said.
A2 Milk had said previously that it had always complied with its disclosure obligations, denies any liability and would vigourously defend proceedings.
