A2 Milk (ASX:A2M) share price drops amid reported second class action

A2 Milk shares are falling as there’s reportedly another class action on the cards.
The post A2 Milk (ASX:A2M) share price drops amid reported second class action appeared first on The Motley Fool Australia. –

The A2 Milk Company Ltd (ASX: A2M) share price is currently down amid news of a second class action against the company.

Another class action?

The company announced to the ASX that it’s aware of media reporting about a potential class action against the company that is apparently being investigated by Shine Justice Ltd (ASX: SHJ).

However, A2 Milk said it’s not aware of any legal proceeding having been filed by Shine Lawyers.

The company noted again that it believes it has, at all times, complied with disclosure obligations, denies any liability and will vigorously defend against any proceedings. It said it will respond further if and when any legal action is launched.

What are the allegations by Shine Lawyers?

The class action by Shine alleges that between 19 August 2020 and 7 May 2021, A2 Milk engaged in “misleading and deceptive” conduct, breaching its continuous disclosure obligations, and failing to adequately disclose future trade plans.

Shine also alleges that by 19 August 2020, A2 Milk was, or ought to have been aware that the FY21 guidance, and subsequent announcements, did not adequately take into account a number of factors known to the company which ultimately impacted the company’s financial performance. This led to a 62% drop in the A2 Milk share price.

There were two factors that A2 Milk referred to.

First, the decline in reseller/daigou sales, which reportedly fell due to the impact of A2 Milk’s sales through its cross border e-commerce channel. Shine noted that this saw A2 Milk heavily market English-labelled infant products directly into the Chinese market with discounting that “effectively undercut” sales in the daigou/reseller channel.

Second, Shine also referred to the decline in the CBEC business due to the drop in the daigou/reseller sales. Shine said that daigou sales often help stimulate demand for direct orders.

Two class actions

This is the second class action that A2 Milk is facing.

The lawyer group Slater & Gordon Limited (ASX: SGH) has also launched a class action. This occurred earlier in October.

Shine’s class action alleges similar sorts of things that the Slater & Gordon one does.

Slater & Gordon said:

The proceeding alleges that by no later than 19 August 2020, A2 Milk was or ought to have been aware that the FY21 guidance and subsequent representations did not adequately take account of a number of factors which would impact the company’s financial performance.

What is the latest guidance from A2 Milk?

FY21 has finished, but guidance for FY22 can have an impact on the A2 Milk share price.

In its FY21 result, A2 Milk said that its revenue fell 30.3% to $1.21 billion and net profit after tax (NPAT) had dropped 79.1% to $80.7 million.

Whilst the company said it wasn’t going to provide specific guidance, it said that it’s confident in the underlying fundamentals of the business and that the growth opportunity in core markets remains “significant”. The company also said there are opportunities for product innovation, category expansion and new markets. It said the long-term outlook is positive.

However, it also said that there is continuing uncertainty and volatility in consumer markets due to COVID-19, and other rapidly changing market dynamics, particularly in China.

The post A2 Milk (ASX:A2M) share price drops amid reported second class action appeared first on The Motley Fool Australia.

Should you invest $1,000 in A2 Milk right now?

Before you consider A2 Milk, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and A2 Milk wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

Top brokers name 3 ASX shares to sell today

Why A2 Milk, Adairs, Bapcor, and Kogan shares are racing higher

A2 Milk (ASX:A2M) share price ticks higher as UBS increases holding

3 punished ASX shares that could come roaring back

Top brokers name 3 ASX shares to sell next week

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!