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Specialty dairy company A2 Milk may face legal action from angry investors, according to an Australian media report.
The Australian Financial Review (AFR) said law firm Slater and Gordon was looking at a class action against A2 on behalf of recent investors who had seen the value of their shares fall sharply after the company downgraded its earnings forecasts four times in nine months.
The AFR said shareholders who bought between mid-August 2020 and early May 2021 may have the basis for a claim, under Australian corporate law, that A2 may have engaged in misleading or deceptive conduct, and breached stock exchange continuous disclosure rules.
A2 Milk downgraded its earnings forecasts in September and December last year, and then February and May this year.
"There may be basis to allege that by no later than August 19, 2020, a2 Milk was or ought to have been aware the full-year 2021 guidance did not adequately take into account a number of factors which would impact the company's financial performance," a letter by Slater and Gordon was quoted as saying.
A2 Milk has trimmed its earnings forecasts and its margins over the four reports citing Covid-19-related issues with closed borders and the impact on the unofficial third party sales - the daigou channel, separate sales through e-commerce channels, and an overhang of supplies.
Its share price has plunged 75 percent from a record $21.74 in August to a low of $5.42 after the latest warning.
A2 Milk said it was not aware of any legal action having been started.
"The company believes that it has complied with all applicable disclosure obligations and denies any claim to the contrary," it said in a stock exchange statement.
The law firm was reported to be following what it believed to be a shift in the source of A2's downgrades from being Covid-19-related to more systemic and structural problems, which may have been known by the company earlier than disclosed.