Business as usual at Surfstitch

LEGAL action against Gold Coast online retailer SurfStitch has been placed on hold after the directors called in administrators to run the beleguared company.

Administrators John Park, Quentin Olde and Joseph Hansell, of FTI Consulting, have been appointed to the group’s non-operating companies, including SurfStitch Group Ltd and SurfStitch Holdings Pty Ltd.

But the trading companies, which run the SurfStitch, SurfDome and Swell websites, will continue as normal with customers receiving their merchandise and employees and suppliers paid.

The move provides SurfStitch, which is also subject to an ASIC investigation, with important breathing space in the lead up to the Christmas sales rush.

Two class actions have been launched this year against SurfStitch, seeking $100 million and $500 million in damages, from shareholders who saw the value of their shares plummet in the wake of profit downgrades.

The law firms Gadens and Quinn Emanuel Urquhart & Sullivan allege SurfStitch failed to disclose the true state of its finances.

The company’s shares, which plunged from $2.13 to 32¢ between November, 2015 and June, 2016, were suspended from trading in May at 6.8¢.

Chairman Sam Weiss said the appointment of administrators provided a chance to focus on the business

“The appointment of administrators at this time is necessary as we seek to put the business on a sustainable footing for the future and to remove uncertainties at the listed and holding company level without impacting business as usual,” he said.

The decision had reflected “exceptional circumstances”.

Mr Park said they wanted to see SurfStitch put on a sound footing.

The administrators will be seeking to recapitalise the holding companies as well as negotiate with potential and existing creditors.

A creditors’ meeting will be held on September 5 where an update on the financial status of the companies will be provided.

The number of creditors is unknown although it is understood the trading companies are solvent.