Quinn Emanuel Urquhart & Sullivan (QE) along with US litigation funder, Regency Funding (Regency) has filed a shareholder class action against listed law firm Shine Corporate Limited (ASX: SHJ) (Shine) on behalf of aggrieved shareholders.
On 29 January 2016, the value of Shine shares plummeted by 73%, following a 10-day suspension from trade for “provisioning and business reviews”. Its updated market guidance saw its forecast FY16 earnings slashed by half, from $54 million to $26 million – wiping out more than $250 million of market capitalisation.
The action, filed in the Supreme Court of Queensland, alleges that Shine misled investors in a series of representations it made to the market in respect of its FY2014 and FY2015 results, in contravention of the obligations it owed under the Corporations Act 2001 and ASX Listing Rules.
QE contends that Shine knew or ought to have known, well prior to its trading halt in January 2016, that discrepancies in its work in progress (WIP) recovery rates, coupled with other related “business factors”, such as “sub-optimal…fee earners”, “legislative reforms” and “market competition” would likely have a material impact on its FY2016 results and accordingly, should have been disclosed to the market.
Damian Scattini, a Partner at QE said, “Shine claims to be ‘always standing up for the little guy.’ But, its shareholders are the very ‘everyday Australians’ it claims to protect. It is ironic that a law firm, which claims to specialise in class actions, would mislead its own investors”.