A2 Milk (ASX:A2M) share price dips on news of a second class action

Here are all the details of the latest class action brought against the company.

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a woman stands with her hand to the side of her head and a sad, slightly distressed look to her expression while holding a large glass of milk in her other hand.

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The A2 Milk Company Ltd (ASX: A2M) share price is in the red today after the company announced it’s been hit with a second class action.

Shine Lawyers is taking the company to the Supreme Court of Victoria on claims similar to those filed by Slater and Gordon Lawyers last month.

At the time of writing, the A2 Milk share price is $6.30, 0.16% lower than its previous close.

Let’s take a look at the new court case facing the embattled company.

A2 Milk share price lower on class action news

The A2 Milk share price is struggling as the company is hit with its second class action in as many months.

The latest case claims the company should have updated the market on the extent of pandemic-induced and, allegedly, company-exacerbated disruptions sooner.

Shine Lawyers alleges A2 Milk breached its continuous disclosure obligations and failed to properly disclose trade plans. It is claiming such conduct was misleading and deceptive.

It states A2 Milk should have known the extent of the impact COVID-19 and other disruptions had to its trade before 19 August 2020 ­­– the day the company released its financial year 2020 (FY20) results and FY21 guidance.

According to Shine Lawyers, “A2M was, or ought to have been, aware that their FY21 guidance, and subsequent representations, did not adequately take into account a number of factors known to A2M which ultimately impacted the company’s financial performance, resulting in a 62% drop in market value in FY21”.

These factors are said to include a drop in diagou, or reseller, sales. The plaintiff states the drop was also partly due to A2 Milk marketing its infant products directly to the Chinese market.

The move allegedly undercut its daigou sales. Therefore, it potentially decreased demand for direct orders and, as a result, cross border e-commerce channel business.

The A2 Milk share price started FY21 trading at $18.72. Over the following 12 months, it fell to just $6.

The class action is open to investors who bought A2 Milk shares between 19 August 2020 and 7 May 2021.

A2 Milk downgraded its guidance for FY21 4 times between the release of its FY20 results and 10 May 2021.

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Motley Fool contributor Brooke Cooper 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.

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