A class action has been filed against A2 Milk on behalf of investors whose shares plunged in price over a nine-month period when the infant formula maker posted four earnings downgrades. 

A2 Milk denies any liability and will vigorously defend the proceeding, A2 Milk said in a statement. The company had previously said it believes all applicable disclosure obligations were complied with.

The claim, filed in the Supreme Court of Victoria by Slater and Gordon Lawyers, is being brought on behalf of shareholders who suffered losses when they bought A2 Milk shares on the ASX and NZX between Aug 19 2020 and May 9 2021.  

The share price was trading at $21.50 prior to the first downgrade in September 2020. On May 10 after the fourth downgrade it was trading at $6.62.  

The class action alleges A2 Milk engaged in misleading or deceptive conduct in breach of Australia's Corporations Act. 

It is also accused of breaching continuous disclosure rules in posting four downgrades on Sept 28 and Dec 18 last year, and then Feb 25 and May 10 of this year.

The downgrades came as the company battled the impact of covid-19 on its business, in particular the massive disruption to the diagou or reseller channel. 

“As a result of our investigation following A2’s profit downgrades throughout FY21, we concluded that there was a strong basis to allege that the company provided misleading guidance and was obliged to correct the market’s understanding of its financial position at a much earlier time,” said Slater and Gordon Class Actions Practice Group Leader Kaitlin Ferris. 

“Investors are entitled to assume that when they purchase shares in a listed company, all of the material information relevant to its financial position has been disclosed,” she said. 

According to Ferris, the downgrades by A2 in the claim period between August 2020 and May 2021 “caught the market by surprise and revealed that A2 had been facing systemic and structural issues with its distribution networks at an early stage of the financial year”.

The claim was issued on an open class basis and therefore covers all shareholders who purchased shares in A2 Milk between Aug 19 2020 and May 9 2021 on the ASX or NZX, the lawyers said.