The class action will allege that the Gold Coast-based action sports online retailer breached its disclosure obligations and engaged in misleading or deceptive conduct relating to announcements to the market around its business and brand acquisition regime.
The claim will be funded by Vannin Capital, one of the largest litigation funders in the world, and it has engaged law firm Quinn Emanuel Urquhart & Sullivan.
"It is clear that SurfStitch made bad deals for the primary purpose of disguising a gaping hole in its revenue," Quinn Emanuel partner Damian Scattini says.
"When the rug was finally lifted, the market saw what was underneath and the SurfStitch share price collapsed into that hole," he says.
The law firm says anyone who bought shares in SurfStitch between August 2015 and June 2016 may be entitled to take part in the class action. Between November 2015 and June 2016, shares in SurfStitch declined from $2.13 to $0.32.
SurfStitch, founded by Lex Pedersen and Justin Cameron (pictured), has attracted media attention over the past 12 months with a massive loss in FY16, a share price wipeout and the acrimonious departure of CEO Cameron.
The company downgraded its earnings three times, largely because of a dispute with surf technology group Coastalwatch and Three Crown Investments over licencing deals which fell through, and this wiped around $20 million off revenues.
Its market capitalisation in late 2015 was around $550 million and now it is $35 million.
SurfStitch posted a reduced $5.6 million loss in the six months to December 31 compared with $13.6 million for the same period in the previous year.
Business News Australia
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