Australia's fourth largest telco Vocus Group faces a proposed shareholder class action over allegedly misleading investors.
The action is being brought by law firm Slater and Gordon and shareholder claim management and funding-service provider Investor Claim Partner.
The claim, according to Slater and Gordon, is to be on behalf of those who bought Vocus shares between 29 November 2016 and 2 May 2017.
It said Vocus had announced a significant downgrade of its FY17 guidance on 2 May, saying revenue would come in at $1.8 billion as opposed to the $1.9 billion it had announced on 29 November 2016.
{loadposition sam08}EBITDA was announced as being between $365 million and $375 million on 2 May as opposed to between $439 and $450 million on 29 November and the underlying profit forecast was trimmed to between $160 million and $165 million on 2 May compared to a range of $205 million and $215 million on 29 November.
Slater and Gordon said the proposed class action included two allegations:
Vocus engaged in misleading and deceptive conduct because it had no reasonable grounds for the original FY17 guidance issued in November 2016; and
Vocus breached its obligations of continuous disclosure by failing to disclose that it would not achieve the FY17 guidance.
Slater and Gordon principal lawyer Mathew Chuk said the claim would allege that as a result of the company’s misleading and deceptive conduct and withholding of information, Vocus’ shares traded at prices significantly above their true value during the claim period.
“Our investigations to date suggest Vocus had unreasonable expectations about the costs involved in integrating its newly acquired platforms and technology systems,” he said.
“The company expanded significantly since 2015 by acquiring other businesses such as Amcom and Nextgen Networks, as well as merging with M2 Group.
“When Vocus issued its FY17 guidance it stated that it expected to gain efficiencies by bringing these businesses together, but we allege this was done without proper visibility of profitability.
“We have also identified an accounting issue relating to recognition of ongoing costs associated with the execution of long term, multi-million dollar service contracts.”
ICP chief operating officer Simon Weeks said despite these issues, the company continued to reiterate its original FY17 guidance.
“There appears to be evidence that Vocus was aware of most of these issues when the FY17 guidance was originally issued in November, thus misleading the market” he said.
“Based on initial interest, VOC shareholders are perturbed by this, as it is yet another example of a listed company not following the listing rules that exist to protect shareholders.
“Adverse, price-sensitive information needs to be disclosed immediately, otherwise shareholders overpay”.
Graphic: courtesy Slater and Gordon