TWE class action may hit $100m

DataRoom: Litigation funder seeks shareholder support over shock writedown.

Litigation funder IMF’s class action against Treasury Wine Estates (TWE) could reach $100 million and has gained strong interest from investors in the United States, on both the retail and institutional level.

IMF Australia (IMF), which is part of the Uncapped 100, is drumming up support from current and former shareholders in a bid to achieve a claim over its $30 million minimum threshold before Christmas. Investors who bought shares between 2012 and 2013 may be eligible to take part in the class action.

The claim size could grow to $100 million, based on the formula favoured by the litigation funder.

The formula measures share price losses incurred by investors in the period the market was alleged to have been misled by Treasury, from 17 August 2012 until the wine giant’s shock announcement on 15 July this year of $155 million in writedowns of its inventory in the United States, which sent its share price 20% lower.

IMF will allege that TWE breached its disclosure obligations over the performance of its US operations in the period and engaged in misleading and deceptive conduct.

Treasury has strongly denied any allegations of wrongdoing and said it will defend any class action proceedings “vigorously”.

DataRoom reported in September speculation that Treasury’s market disclosure practices could be the target of a class action, after the  group removed chief executive David Dearie for failing to keep a close enough eye on the winemaker’s troubled US market.

Treasury Wine Estates’ top 20 shareholder register is opaque, with most held in the name of banking custodians. Substantial shareholders include The Capital Group, BlackRock, Scottish investment management firm Baillie Gifford & Co and mutual fund giant Fidelity Investments, according to Bloomberg data. Some of the Australia’s biggest superannuation and industry funds also have holdings in Treasury.

IMF’s class action comes amid growing scrutiny of litigation funders. The Productivity Commission is examining the industry as part of its current inquiry into access to justice.   

Amid the discussion of the role of litigation funders, some company directors have come out and said they are more scared of class actions than of the country’s regulators. 

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