Ardent Leisure share price surges 10% despite facing $4.5 million fine

The Ardent Leisure share price closed 10% higher yesterday despite the company facing potential fines of $4.5 million due to safety breaches.

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The Ardent Leisure Group Ltd (ASX: ALG) share price closed 10.4% higher yesterday, despite the company facing potential fines of up to $4.5 million. The operator of the Dreamworld Theme Park on the Gold Coast released a statement prior to the market open Tuesday addressing the filed charges.

Ardent addresses prosecution in relation to Dreamworld tragedy

Ardent Leisure released an announcement yesterday acknowledging the three charges that the Queensland Work Health and Safety prosecutor filed against the company. The charges were in relation to the 'Thunder River Rapids Ride' accident that occurred at Ardent Leisure's Dreamworld them park in 2016. The tragedy resulted in the deaths of four patrons.

In the announcement, the company's management expressed their sympathies to the families and friends impacted by the tragedy. In addition, Ardent noted that Dreamworld has taken proactive steps to improve safety across the theme park whilst also adapting to new amusement park safety regulations.

What charges have been filed against Ardent?

The Queensland Work Health and Safety Prosecutor lodged three, category 2 charges against Ardent Leisure, with each charge carrying a maximum penalty of $1.5 million. According to the prosecutor, Ardent Leisure failed to comply with its health and safety duty and exposed individuals to risk of serious injury or death. It is alleged the company failed to provide and maintain safe structures and proper training and supervision of staff.

The prosecutor's investigation follows a coroner's report released in February that criticised Ardent's culture and practices. The coroner's inquest outlined a series of safety breaches at Dreamworld over the past 30 years which resulted in avoidable deaths.

Why did the Ardent share price rally?

The Ardent share price initially started yesterday's trading session around 4% lower before rallying to close more than 10% higher. Since there are no real positives to be gleaned from the recent news, it can be assumed that the higher percentage move is the result of Ardent's share price being severely sold-down during the coronavirus pandemic.

Shares in Ardent Leisure were smashed during the height of the pandemic. After hitting a high of around $1.60 in January, the company's share price crashed to a low of 10.5 cents in late March and is now trading at 37 cents.

The company is also facing a Federal Court class action from disgruntled shareholders who were impacted by the sharp plunge in the Ardent share price following the tragedy.

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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