Surfstitch extends trading halt until August on "high level of uncertainty"
In the latest turn of events for embattled Surfstitch, the multibrand online retailer will extend its voluntary trading halt on the ASX until August, on the back of implications surrounding a $100 million class action and "the high level of uncertainty around the negotiations with the litigation funder."
The Australian surf and fashion apparel retailer said it felt that the possibility of a negotiated settlement of the law suit "at a level that would permit the company's continued financial viability" should be fully explored, among other options, before stopping the halt.
"The high level of uncertainty around the negotiations with the litigation funder, and the company restructure, together with the need to assess the variety of options which may be available to the company in carrying out these processes, and the potential impact on the company's continued financial viability, will impact the company's ability to keep the market reasonably informed during the period that these processes are ongoing," SurfStitch said in a statement to the ASX on Friday.
The suspension will hold until Surfstitch reports its full-year results by August's end. The company said by then it is expected to either have reached a settlement or decided a settlement couldn't found that suited shareholder interests.
The $100 million 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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