Halt on Surfstitch
Townsville SURFSTITCH shares have been suspended for at least three months after the troubled online sportswear retailer was hit by a $ 100 million shareholder class action.
The retailer yesterday said it expected the suspension to last until its full- year results, due at the end of August.
In a statement, the group said the suspension would end with an agreed settlement of the claim or Surfstitch concluding a settlement was unworkable or undesirable.
Law firm Quinn Emanuel this week filed an action in Queensland’s Supreme Court alleging Surfstitch failed to tell shareholders it was trading at a loss and tried to cover it up.
Surfstitch shares have been in a trading halt since Wednesday while the board reviewed the claim.
“While the quantum of the claim remains unknown, the subject matter of the claim is highly complex in nature and the level of damages sought pursuant to the claim is likely to be substantial,” Surfstitch said in a statement to the Australian Securities Exchange.
It said that as such, the claim was likely to be “material by comparison to the current market capitalisation of the company”.
That market value has plunged from about $ 590 million in November 2015 to just $ 18.9 million. Surfstitch shares have plummeted from $ 2.13 to an all- time low of 6.8c in just 18 months.
The company said it was accelerating its restructure in light of the legal action.
Backed by litigation funder Vannin Capital, the class action announced on Tuesday is open to anyone who purchased or held Surfstitch shares between August 27, 2015, and June 8 last year.
Quinn Emanuel said Surf- stitch, founded in 2008 by equities analyst Justin Cameron and retailer Lex Pedersen, should never have made or repeated its earnings forecast for the year to last June of $ 15 million to $ 18 million.
At its full- year results last August, the company posted an underlying loss before interest, tax, depreciation and amortisation of $ 18.8 million.
The latest in a series of downgrades to its earnings forecast came on Monday, when Surfstitch said it expect- ed its full- year loss to double.
The retailer was majority owned by Billabong before that struggling surfwear company offloaded its 51 per cent stake in the online retailer, clearing the way for a float in December 2014.