Embattled Australian technology start-up, GetSwift (ASX:GSW), has said it plans to contest a class action potentially worth up to $300 million alleging it misled shareholders about the nature of several price-sensitive contracts.
“GetSwift…advises that it has been served by law firm Squire Patton Boggs with an application to commence class action proceedings against the Company in the Federal Court,” the company told shareholders on 21 February.
“The application alleges that the company breached its continuous disclosure obligations and that it engaged in misleading and deceptive conduct, and seeks damages as a result.
“The company intends to contest this action and legal counsel has been engaged,” it said.
The comments come just days after the publicly-listed tech start-up, which provides an internally-developed “last mile” software-as-a-service (SaaS) logistics solution, was reinstated on the Australian Securities Exchange (ASX) nearly a month after it was suspended from quotation.
On 19 February, when it was reinstated on the ASX, the company released a statement saying that PricewaterhouseCoopers (PwC) had completed the initial stage of its review into its compliance of ASX listing rules.
On the same day, the company revealed that less than half of its enterprise client contracts had progressed through to early stages of the revenue generation phase.
“These are primarily comprised of earlier enterprise client contracts. Other than as previously disclosed, the majority of announced enterprise client contracts continue to progress through various pre-revenue generation phases,” the company said.
According to Fairfax Media, it was GetSwift’s alleged failure to update the market in relation to discontinued contracts that saw it initially suspended from trade after the Australian Financial Review questioned the veracity of announcements made to the market on 20-21 January 2018.
The AFR alleged that clients with whom “exclusive” multi-year contracts were asserted acknowledge trialling the software, but denied continuing its use.
It is these questions around GetSwift’s disclosure of material contracts that are at the core of at least two proposed class actions against the company, and possibly a third.
The class action that has already been filed in the Federal Court of Australia by Squire Paton Boggs, alleges that investors who snapped up shares either on market or during two capital raising efforts may not have done so had they known about the loss of certain contracts, according to Fairfax Media.
“Companies are required to have a factual basis for their announcements” Squire Patton Boggs said in a statement. “They are also obliged by the continuous disclosure provisions of the Corporations Act to update the market should any information that is not generally available become known to the company, which a reasonable person would expect to have a material impact on the price of the shares.”
According to Fairfax Media, Amanda Banton from Squire Patton Boggs estimates that the measurable damages relating to the case could come to $300 million.
At the same time, Vannin Capital – the litigation funder behind one of two class actions against Dick Smith Holdings – is also in the process of pulling together a case against GetSwift.
Vannin said that the nature of its potential claim against GetSwift revolves around two core allegations. These include the allegation that the company made misleading and deceptive statements to the market in relation to contractual arrangements said to have been reached with large service providers.
The second allegation is that GetSwift failed to comply with its continuous disclosure obligations on becoming aware of information that was not generally available, which a reasonable person would expect to have a material impact on the price of the shares.
“We are investigating whether the price of GSW shares during the period between 24 February 2017 and 19 January 2018 was higher than it would have been had the true state of GSW’s affairs been known to the market,” Vannin Capital said.