FEDERAL COURT FINDINGS EMERGE
The Federal Court has ruled that logistics giant Brambles misled investors regarding its financial standing, potentially paving the way for shareholders to recoup significant losses nearly a decade after initiating a class action. This judgment comes after a protracted legal battle, with the court determining that Brambles failed to adequately inform shareholders about its actual financial condition. The decision is seen as a crucial development for market integrity, as investor class actions typically resolve before a final verdict.
COMPENSATION POTENTIAL
Brambles may face a compensation bill exceeding $100 million. This figure stems from the Federal Court's finding that the company's financial projections were overly optimistic. The judgment was handed down over three years after the class action trial concluded. Shareholders who acquired Brambles shares between August 18, 2016, and February 17, 2017, are considered group members and may be eligible for compensation if they purchased shares at an inflated price due to the company's guidance.
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LEGAL PROCEEDINGS UNFOLD
The legal conduct of the proceeding has transitioned, with Echo Law now managing the case, having been substituted for Slater and Gordon Lawyers. Omni Bridgeway is handling communications with the group members. Shareholders affected are advised to direct queries to Omni Bridgeway's client team.
"The court outcome was an important win for shareholders and market integrity." - Rebecca Gilsenan, Maurice Blackburn
BACKGROUND TO THE DISPUTE
EARLIER WARNINGS AND DOWNGRADES
The controversy traces back to periods where Brambles issued earnings downgrades. A notable instance involved the company cutting its guidance, leading to a 9.9% drop in share price. Earlier, a previous earnings revision had already caused a nearly 16% share-price fall, followed by a further 10% decline after a subsequent revision. Investigations suggest Brambles was aware of significant challenges in its US pallets business as early as October 2016, including customer de-stocking and competitive pressures, which indicated the company might miss its projected sales and profit growth targets.
CONSOLIDATED ACTIONS
Initially, two class actions were filed against Brambles concerning alleged disclosure failures and share price plunges. These actions were later consolidated by court order in May 2019, reflecting the shared nature of the allegations.
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ALLEGATIONS OF MISLEADING THE MARKET
Core to the class actions is the allegation that Brambles misled the market by presenting its FY16 profit growth as sustainable. It is claimed that the company knew the exceptional growth achieved in FY16 was unsustainable and would preclude similar growth in FY17. Brambles is accused of wrongly withholding information it was legally obligated to disclose as an ASX-listed entity. The company has maintained it complied with its disclosure obligations and acted in shareholders' best interests.
