Freedom Foods shareholders file class action

Freedom Foods is at the centre of a class action alleging it made statements amounting to misleading or deceptive conduct, following revelations of massive writedowns.

Law firm Slater and Gordon has filed a class action on behalf of Freedom Foods shareholders in the Victorian Supreme Court.

FREEDOM Foods shareholders are not swallowing their losses after the listed dairy, cereal and snacks maker recently revealed more than $590 million in writedowns, launching a class action against the company and its auditor Deloitte in the Victorian Supreme Court.

Slater and Gordon has filed the shareholder class action on behalf of anyone who bought shares in the troubled company between December 2014 and June this year.

Their case alleges that shareholders bought their holdings at inflated prices due to allegedly misleading conduct on behalf of Freedom Foods and its long-term auditor Deloitte, which signed off on the company’s financial statements over the six year-claim period.

The proceeding also alleges that Freedom Foods — maker of Milk Lab plant-based milks and Australia’s Own Dairy — contravened its obligations of continuous disclosure of price sensitive information and made statements about its financial performance that mislead the market, and that Deloitte did not obtain sufficient audit evidence in Freedom Foods’ financial reports between 2014 and 2020.

The legal action follows revelations to the ASX last month that Freedom Foods was pursuing a significant recapitalisation to offset ballooning losses, including a $174 million loss for the 2020 financial year.

In little over half a year, the company’s image as a successful food and beverage manufacturer is in tatters, with cumulative losses revealed of almost $600 million after previous financial statements were restated.

The downfall began around May when a warehouse consolidation program uncovered products being sold at prices that didn’t cover their cost of production, out-of-date, unsaleable and obsolete inventory and significant issues with inventory accounting practices that led the Australian Securities and Investments Commission to initiate its own investigation into the matter, which is still underway.

The company’s board launched its own investigations into its finances, enlisting the help of PwC, Ashurst, Arnold Bloch Leibler and Moelis Australia, which ultimately led to the adjustments of prior financial statements, asset writedowns and restatements of more than half a billion dollars.

Freedom Foods has appointed Arnold Block Leibler to defend the proceeding.

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