Law firm Slater & Gordon has joined with Investor Claim Partner (ICP), a shareholder claim management and funding-service provider, to propose a shareholder class action against Vocus Communications over allegedly "misleading and deceptive conduct".
The action would centre on claims that Vocus had overstated its guidance for FY17 as it worked to integrate Amcom and Nextgen Networks and to merge with M2 Group.
“Our investigations to date suggest Vocus had unreasonable expectations about the costs involved in integrating its newly acquired platforms and technology systems,” Slater & Gordon principal lawyer Mathew Chuk said.
On 29 November, Vocus forecast revenue of $1.9 billion, EBITDA of $430-450 million and NPAT of $205-$215 million. On 2 May 2017, it revised its forecast down to revenue of $1.8 billion, EBITDA of $365-$375 million and NPAT of $160-$165 million.
In a trading update on 2 May, Vocus outlined reasons for the downgrade, including revenue from large projects being moved to future periods, the divestment of the Aggregato business and Cisco HCS voice platform, the impact of lower-than-expected billings in enterprise and wholesale and higher-than-forecast group expenses, especially technology.
Vocus' shares have lost more than 65 percent of their value in the past 12 months, falling from $7.00 last September to trade at $2.41 when markets closed yesterday.
"When Vocus issued its FY17 guidance it stated that it expected to gain efficiencies by bringing these businesses [Amcom, Nextgen and M2] together, but we allege this was done without proper visibility of profitability," Chuk added.
“We have also identified an accounting issue relating to recognition of ongoing costs associated with the execution of long-term, multimillion-dollar service contracts.”
Simon Weeks, ICP's chief operating officer, said there was evidence to suggest that Vocus was aware of these issues when it continued to re-iterate its original FY17 guidance.
“Based on initial interest, VOC shareholders are perturbed by this, as it is yet another example of a listed company not following the listing rules that exist to protect shareholders.
“Adverse, price-sensitive information needs to be disclosed immediately, otherwise shareholders overpay," Weeks added.
In a statement, Slater & Gordon and ICP said a class action would be brought "on behalf of hundreds, if not thousands of people who purchased Vocus shares between 29 November 2016 and 2 May 2017".
They are calling on investors who acquired Vocus securities between these dates to register their interest in joining the class action.
Vocus responded to the class action proposal, stating: "We understand that Slater & Gordon have issued a release indicating they are seeking interest in a possible class action. At all times, Vocus has complied with its continuous disclosure obligations and will continue to do so."