Investors heap pain on Ardent
A CLASS action on behalf of stung Ardent Leisure shareholders alleging tens of millions in losses looms as a bigger financial headache for the Dreamworld theme park operator than charges laid on Tuesday after 2016’s four deaths on a ride malfunction.
Ardent, opening Dreamworld along with WhiteWater World in time for the September school holidays, is burning through $5-$10 million each month its parks are closed.
Work Health and Safety prosecutors on Tuesday issued three negligence charges against Ardent over the 2016 deaths of Kate Goodchild, Luke Dorsett, Roozi Araghi and Cindy Low with a maximum penalty of $4.5 million. Any fine imposed by the court is likely to be covered by Ardent’s insurance policies.
Parker Simmonds Solicitors commercial litigation director Bruce Simmonds said civil claims could end up in the hundreds of thousands but in most cases were covered by insurers. But as a result insurance premiums would increase.
IBISWorld senior industry analyst Liam Harrison said Ardent was already facing huge challenges prior to the charges.
“They’re hurting so much more from coronavirus. This legal battle might be the straw that breaks the camel’s back but could also be another thing to add to the pile of pain to the business for six to 12 months.”
EL & C Baillieu analyst Nick Caley said Ardent was in a sound financial position because of its sale last month of a 24.2 per cent stake in its US Main Event chain of bowling and family entertainment arcades to private equity’s RedBird Capital Partners for $117 million.
“Financially it (the charges) is not an issue. They just sold 25 per cent of their US business. That has de-risked their financial position completely depending on how this virus goes,” Mr Caley said. “It is a pretty small part of the company now. Main Event is the dominant asset now. They still have working capital. In the overall scheme of things it is a small amount for Ardent.”
Another financial problem is a class action by Piper Alderman for Ardent shareholders.
The law firm alleges Ardent misled investors about safety and corporate governance in place at Dreamworld in years before the 2016 fatalities, causing Ardent’s shares to trade at an artificially inflated price.
Special counsel Lachlan Lamont said the claim had reached the number litigation funders needed to proceed.
“A significant group of shareholders have signed up to the class action representing tens of millions of investment in the company,” he said. “Shareholders paid too much for a share in a company at risk of a massive disaster occurring and that did in fact occur.”
Mr Lamont said 13,000 Ardent shareholders in August, 2016, were eligible to be part of the class action, for people who bought shares between June 17, 2014 and October 25, 2016.
He said Piper Alderman had a July 30 hearing in Federal Court in Brisbane, seeking to access Ardent’s insurance policies and asking for policy particulars including director and officer insurance policies. “If they say they have no money but an insurance policy then we press on.”