May 25, 2017
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Surfstitch enters trading halt on $100m class action implications

May 25, 2017

It's been wave after unrelenting-wave for embattled Surfstitch. After slashing its full-year profit guidance this week and announcing the online surf and apparel retailer would close its US operations, Surfstitch has entered into a trading halt -- due to end on Friday, while it considers the implications of a $100 million class action launched by disgruntled shareholders.  

Surfstitch has entered into a trading halt -- due to end Friday, while it considers the implications of a$100 million class action launched by disgruntled shareholders -Surfstitch - DR

The suffering Australian e-tailer made the cautionary move on the local ASX on Wednesday, so it could "assess the claim and consider its response" to the action, according to a press release.

The firm's shares are to remain halted from trading until the company provides the ASX with its findings, which looks to be Friday morning local Sydney time.

The class action was first made known to Surfstitch in early May. Lead by Vannin Capital, the class action is seeking compensation for lost money after the retailer's share price plunged 90% over an eleven-month period, thanks to a series of profit downgrades and poor acquisitions.

The action accuses SurfStitch of misleading and deceptive conduct and breaching its continuous disclosure obligations over comments about the future of the business that it claims led the market to believe the shares were worth more than their true value.  

Shareholders saw the value of their shares dive from around AU$1.85 to 18.5¢ between August 2015 and June 2016, meaning the e-tailer's market value dropped $500 million. 

Sydney law firm Quinn Emanuel Urquhart & Sullivan have been engaged to file the $100 million class action claim against SurfStitch in the Queensland Supreme Court.

The news follows Surfstitch's full-year profit downgrade earlier in the week, warning that losses would double to between A$10.5 million and A$11.5 million in the 12 months ending June.

The surfwear company has been in turmoil since Justin Cameron, its co-founder and CEO, unexpectedly quit the business in March last year to consider a privatisation bid. 

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