Surfwear e-tailer, Surfstitch, is facing a $100 million class action by ‘aggrieved shareholders’ who believe the company’s board has engaged in deceptive conduct. Law firm, Quinn Emanuel, yesterday filed the class action on behalf of Surfstitch’s shareholders. Documents filed with the court allege SurfStitch breached its disclosure obligations and engaged in misleading or deceptive conduct in relation to announcements made to the market concerning its extensive business and brand acquisi
tion regime.
Quinn Emanuel partner Damian Scattini said that he believed the claim was valued at around $100 million. “Companies need to know that the free market depends on them being upfront with investors,” he said.
“Class actions like this send a powerful message to company boards that if you mislead investors, you will be held to account.”
It appears that yesterday’s market update was the final straw for shareholders, after the e-tailer’s market update saw another profit downgrade issued.
Surfing e-tailer, Surfstitch, is expecting to double its losses and also announced the planned closure of its North American arm.
Citing the ‘difficult business environment for apparel and footwear’, particularly in the UK, Surfstitch now expects EBITDA loss to be in the range of $10.5m to $11.5m from the range of $5m to $6.5m previously advised to the market for the financial year.
“The retail environment has made it difficult to deliver the planned sales and gross margin improvements as quickly as we would like, resulting in the revised forecast for the group’s underlying EBITDA” said Mike Sonand, CEO, Surfstitch.
The surfwear brand announced the transfer of the management of the Swell e-commerce platform from the US to Australia and the wind down and closure of its North American operational infrastructure by January 2018
“Although, considerable progress has been made in arresting losses in North America, the region will continue to be unprofitable for the foreseeable future and so we have made the difficult decision to close our US operating infrastructure,” said Sonand.
“The new technology platform we have implemented in Australia will enable the Swell site to operate in North America whilst being serviced and managed by our teams in Australia.
Surfstitch’s executive leadership team and its co-founders have all left amid the turmoil.
Surfstitch shares hit an all-time low of 6.9 cents on Monday – down from $2.13 in November 2015 – after the firm again downgraded its earnings guidance, said it will close its US office and expects its full-year loss to double.
