Dick Smith class action ‘not a given’
DISGRUNTLED Dick Smith shareholders could face months of uncertainty over the likelihood of a class action around the downfall of the electronic retailer.
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DISGRUNTLED Dick Smith shareholders could face months of uncertainty over the likelihood of a class action linked to the downfall of the electronic retailer.
Legal experts say neither Dick Smith’s share price plunge nor its tumble into receivership are enough on their own to trigger legal action.
Any class action would need to demonstrate Dick Smith directors failed to disclose market sensitive information or made misleading statements to investors about the health of the group.
There would also have to be a reasonable prospect of recovering enough cash to make a class action worthwhile — potentially a major stumbling block.
“It costs millions to run a class action, so it’s got to be worth it in terms of what shareholders will get back,” said one legal expert, who asked not to be named.
“There’s no point running a case just to rack up lawyers’ fees.”
Dick Smith shocked shareholders and customers on Tuesday by announcing its lenders had called in receivers just two years after a
$520 million listing on the Australian Securities Exchange.
Investors who had bought into the float at $2.20 a share were already counting the cost after two profit warnings late last year wiped 80 per cent off the value of their shares.
The shares last changed hands for just 35.5c before they were placed in a trading halt on Monday, then suspended from trade the next day.
Customers were also left irate after receivers Ferrier Hodgson announced Dick Smith gift cards would not be honoured and lay-by deposits could not be refunded.
Maurice Blackburn Lawyers said no decision had yet been made on whether a class action could or would be pursued against the retailer.
“We’re of course aware of what is happening at Dick Smith and will monitor that situation, but at this stage it is too early to give a definitive indication either way,” class actions spokesman Cameron Scott said.
Litigation maverick Mark Elliott, who is behind a string of class actions brought against Australian businesses, could not be reached for comment.
Dick Smith chief Nick Abboud warned in October the group’s net profit for the year to next June was likely to be $5 million to $8 million lower than previously expected.
Just a month later, the group was unable to reconfirm the forecast and announced it would write down $60 million worth of inventory. Australian Shareholders’ Association spokesman Allan Goldin said the rapid decline in the business raised questions about the effectiveness of the leadership.
“I assume the directors did not realise they had this serious issue until November, so my question is why they didn’t know before?” Mr Golding said.
“These directors
are paid a lot of money to
run a company and they should know things like that.”
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