Australia's biggest milk producer, Murray Goulburn, and its board are being sued by investors for allegedly misleading investors ahead of its float last year.
The class action was filed in the Supreme Court of Victoria just days after it emerged members of the board of the milk producer were allegedly aware it was not meeting its targets months before informing the market.
Investor advocate Mark Elliott - who recently won a class action on behalf of investors in Downer EDI - lodged the claim on behalf of investor John Webster, who will act as "lead plaintiff" in the case on behalf of other investors who join the action.
The class action alleges the company and its directors -- including chairman Phil Tracy and former chief executive Gary Helou -- were aware it "did not have reasonable grounds for making the misleading PDS representations" at the time it embarked on its $500 million pre-float raising.
It is also alleged the company breached its continuous disclosure obligations by not telling the market sooner it would not meet its profit forecasts, including as early as at its October annual general meeting.
A spokeswoman for Murray Goulburn said the company did not consider it had any issues with its continuous disclosure regime or the statements made in its product disclosure statements.
She said the company was limited in what it could say because it was yet to be served with the claim.
Murray Goulburn's share price fell on April 27 after it slashed its profit forecasts in late April on the back of weakened demand for its milk powder products in China.
The fallout of Murray Goulburn's profit downgrade was made worse for Australia's dairy farmers who supply the company.
They were told the farmgate price of milk would be lowered from $5.60 for every kilogram of milk solids to $4.75 a kilogram after Murray Goulburn had overestimated the value of the milk.
Adding to the pain was Murray Goulburn's decision to backdate the lower milk price for the 2015-16 and to warn farmers that milk prices would remain low for another three years to make up for the "overpayment" they had received.
Murray Goulburn floated on the sharemarket a little less than a year ago on the promise that dismantling the farmers co-operative would produce better financial results for farmers, including areturn to a milk price of $6 a kilogram.
The revised forecasts of a profit of between $39 and $42 million were well below the profit forecast in the company's product disclosure statement released ahead of its July 2015 float of more than $85 million.
It all started to come unstuck for Murray Goulburn a few months ago. In February, Murray Goulburn lowered its forecast profit to $63 million on the back of weak dairy commodity prices.
Only weeks ahead of its swingeing late April downgrade, the company had soothed investors that changing regulations in China would not have a material impact on Murray Goulburn's business.
Murray Goulburn's shares fell from $2.14 to $1.23, a fall of more than 40 per cent after announcing the downgrade. Its shares were languishing at 95.5¢ after market close on Monday next to a float price of $2.10 last May.
Investors who purchased units in the MG Unit Trust through the May 2015 float of the dairy farmer co-operative are able to participate in the claim. Other investors who bought into the stock between July 2015 and February 29, 2016 - the day of Murray Goulburn's first profit revision - and still held those units at the start of trading on April 27 are eligible to participate in the class action.
- This story first appeared in the Australian Financial Review.
