Potential shareholder class actions against Quintis are hinging on December 16, 2016, being the date the sandalwood grower admits
it lost a significant supply deal with Nestle's Galderma without company leaders' knowledge.
Three law firms – Bannister Law, Slater & Gordon and Piper Alderman – are now investigating mounting a class action, seeking to act on behalf of anyone that bought shares between that date and May 9, 2017.
What happened in that six-month period has become a source of great interest to investors in the company, which saw its market value collapse 72 per cent last week after conceding that it lost the Galderma deal without the board and top management briefed.
On the morning of May 10, the Perth-based former TFS told the market that a "breakdown" in communication meant this development was not conveyed by Quintis' Santalis pharmaceutical business in the US to the upper echelon of the company at the time.
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In the coming week,
Quintis shares are expected to exit a trading suspension and the group will provide updated disclosures that cover its earnings and plantation guidance for 2016-17. It will also respond to an ASX query issued May 11; it is the second one that it has received this year.
The shares have not changed hands since last Friday when they closed at 30¢.
Depriving investors
On Friday, the ASX-listed Litigation Capital Management said it would fund Piper Alderman's action. Piper Alderman estimates $309 million of market value was wiped out.
"It is clear that investors have been deprived of certain information and we are investigating whether there is a viable basis for a class action to recoup the losses they have suffered as a result," Patrick Moloney, LCM's managing director, said in a statement.
Bannister Law, which says it has received many expressions of interest, is also zeroing in on whether the directors and officers were in breach of the continuous disclosure obligations. Quintis declined to comment.
The uncertainty comes at a critical time for Quintis, which is still reliant upon the fees earned from selling plantations to new investors – most of which happens in the final weeks of the June quarter. Those fees can extend into the tens of millions for deals involving institutional buyers such as asset manager GMO and an Ivy League endowment fund. Retail managed investment scheme investors represent only a small portion of the take-up, which is underpinned by institutional and sophisticated buyers.
The company owns trees in its own right too, and earns management fees from maintaining investor-owned trees.
Short-seller interest in Quintis intensified in March when US hedge fund Glaucus published research claiming shares of the former TFS were worth zero and likened aspects of the business to a ponzi scheme. Quintis strongly denied those claims and continues to dispute Glaucus' analysis.
Ratings agency Moody's and S&P downgraded the company's debt last week; bonds issued by Quintis have sold-off sharply.
'Unacceptable' breakdown
The chairman of Quintis, Dalton Gooding, has described the breakdown in communication within the company as "unacceptable".
The lifting of the suspension over Quintis shares will also reignite intrigue around a takeover bid being led by founder and former managing director Frank Wilson. Mr Wilson resigned from Quintis in March after the public attack by short-sellers sent the shares crashing.
He is still the company's largest shareholder and has hired Goldman Sachs as adviser on a potential transaction. Mr Wilson has not made any comment on the events at Quintis since he issued a statement upon his departure, saying he had received a "serious" approach from a "credible" unnamed party.
Glaucus' bid to bring down the share price was highly effective because it managed to unearth the admission that Quintis had not shipped a single timber order to its biggest customer in China in 2017. That confession was included in response to the ASX's query on March 27, when the ASX asked for the names and any material information related to its aforementioned buyers in China, India, the Middle East and the US.
That same disclosure also contained a reference to the Galderma "contract", which was described as a 20-year agreement effective 2014 with no fixed annual supply.
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