Just when you thought we had heard enough, Bellamy's Australia Ltd (ASX: BAL) has another thing to think about.
Bellamy's is already under pressure following a decision this week by law firm Maurice Blackburn to launch an investigation into a potential breach of the company's reporting obligations.
"There is good reason to suspect that Bellamy's knew or ought to have known about the expected impact of the regulatory changes much earlier than when it ultimately informed the market," Maurice Blackburn's Class Action Principal, Ben Slade, said.
Maurice Blackburn opened a portal for some shareholders to register their interest in a class action.
Also this week, Slater & Gordon Limited (ASX: SGH) and IMF Bentham Ltd (ASX: IMF) announced they too have teamed up to investigate the infant formula maker.
Slater and Gordon's Senior Class Actions lawyer, Mathew Chuk, said Bellamy's had failed to tell investors about the market risks and challenges it faced.
"Bellamy's had a reputation as a quality company selling quality product," Mr Chuk said in an emailed media release.
"Our investigations to date suggest that the company prioritised preserving that reputation at the expense of properly disclosing to investors the risks and challenges that the company was facing at home and in China."
"Furthermore, we are investigating whether Bellamy's repeated statements to the market since April 2016 regarding its likely performance in China had the effect of misleading shareholders."
How the Bellamy's saga unfolded
On 2 December 2016, Bellamy's share price plunged 43% after the company, which had previously grown sales and profits at impressive rates, announced that a "temporary volume dislocation due to regulatory changeover" in the key Chinese market would see revenue decline and profit margins crimped.
Then, on 12 December 2016, Bellamy's requested a trading halt to update the market on its financial forecasts.
Finally, on 14 December 2016, when Bellamy's shares were due to emerge from the halt, the company requested and entered a voluntary suspension. The company said the suspension, which is likely to last until 21 December 2016, will help it "manage its continuous disclosure obligations whilst it continues with a review in order to finalise an updated announcement of the impact of trading conditions on the Company's expected financial results."
IMF Bentham, a specialist litigation funder, has now joined forces with Slater and Gordon to fund a potential class action on shareholders' behalf.
"Investors will have lost hundreds of millions of dollars from purchasing Bellamy's shares in a potentially misinformed market," IMF Investment Manager Simon Dluzniak said. "We are investigating whether a class action is a viable option to recoup those losses."
Investors who bought shares between 14 April 2016 and 9 December 2016 can register their interest on the IMF Bentham website.
Foolish takeaway
Bellamy's Australia joins a string of ASX-listed companies, including Sirtex Medical Limited (ASX: SRX) in delivering bad news to the market when many investors believed everything was rosy.
It is up to investors to conduct their due diligence on any investment. However, as is the case for Bellamy's, it can be difficult for investors to channel-check whether what is being done in particular markets indeed matches up with what management is saying.
