A2 Milk (ASX:A2M) share price on watch after being hit with class action

A2 Milk has been hit with a class action…

| More on:
Judge's gavel and justice scales

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The A2 Milk Company Ltd (ASX: A2M) share price will be one to watch closely on Wednesday.

This follows news that the embattled infant formula company has been hit with a class action.

A2 Milk share price on watch after class action

The A2 Milk share price could come under pressure today after Slater & Gordon Limited (ASX: SGH) revealed that it has filed a class action in the the Supreme Court of Victoria. This is on behalf of shareholders that bought A2 Milk shares between 19 August 2020 and 9 May 2021.

The law firm alleges that the infant formula company engaged in misleading or deceptive conduct in breach of the Corporations Act, and breached continuous disclosure rules when posting four guidance downgrades during the course of FY 2021.

It is because of these downgrades that the A2 Milk share price has lost 54% of its value over the last 12 months.

Slater & Gordon believes that by no later than 19 August 2020, A2 Milk was or ought to have been aware that its FY 2021 guidance and subsequent representations did not adequately take account of a number of factors which would impact the company’s financial performance.

These include:

“a2’s attempts to boost sales by pushing English label infant nutrition stock through the cross-border e-commerce channel with attendant price discounting consequences would necessarily negatively impact its sales in the daigou/reseller channel.”

“a2’s sales through the cross-border e-commerce channel would in turn be impeded by the disruption to the daigou/reseller channel and the loss of associated marketing activity to stimulate consumer demand,” it added.

A2 Milk’s response

This morning A2 Milk acknowledged that it has been notified that group proceedings have been filed in the Supreme Court of Victoria.

In response, the release states: “The Company considers that it has at all times complied with its disclosure obligations, denies any liability and will vigorously defend the proceedings. The Company remains confident in the underlying fundamentals of the business and growth potential.”

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Consumer Staples & Discretionary Shares

two children squat down in the dirt with gardening tools and a watering can wearing denim overalls and smiling very sweetly.
Consumer Staples & Discretionary Shares

‘Back to a growth mindset’: Expert names ASX share ready to take off

In just two years this business overcame devastation and is now ready to grow again, reckons this fund manager.

Read more »

a happy woman wearing a white towel around her chest and another around her head laughs heartily while holding two slices of cucumber over her eyes as part of a beauty regime.
Consumer Staples & Discretionary Shares

Adore Beauty share price volatile following CEO resignation

Adore Beauty's CEO has called it time.

Read more »

A man looks sadly away from his computer screen as he holds a slice of pizza in his hand with an open pizza box in front of him on his desk.
Consumer Staples & Discretionary Shares

Is it a problem for shareholders that Italians don’t like Domino’s Pizza?

The pizza chain appears to have fizzled out in Italy.

Read more »

A group of people clink wine glasses in an outdoor, late afternoon setting to celebrate the rising Treasury Wine share price
Consumer Staples & Discretionary Shares

Treasury Wine share price up amid key China trademark win

Pop open the champagne bottle: the company just won a Chinese court case.

Read more »

a small girl sits with her hand holding up the side of her face as she looks down in a downcast manner as she drinks a glass of milk through a straw.
Consumer Staples & Discretionary Shares

Why is the A2 Milk share price spilling 8% today?

It's been a tough day for A2 Milk shareholders.

Read more »

A happy farmers sifts his fingers through grain, indicating a good crop and higher prices
Consumer Staples & Discretionary Shares

Why is the GrainCorp share price up 7% today?

The agribusiness has delivered good news to the market on Wednesday.

Read more »

A person with a round-mouthed expression clutches a device screen and looks shocked and surprised.
Consumer Staples & Discretionary Shares

iSelect share price explodes 75% on takeover news

The iSelect share price is sky high after the company revealed a takeover offer from the owner of www.comparethemarket.com.au.

Read more »

ASX retail ASX property war
Consumer Staples & Discretionary Shares

ASX 200 better buy: Wesfarmers or Woolworths?

Let's see how these ASX stalwarts stack up.

Read more »