Farmer Fred - agree that the lawyers and litigation funders set their fees pretty high, but the fees are usually capped and success-based, and they do land up taking a risk you can't insure against. If you don't believe me, have a look at the earnings of IMF (Australia), who fund a lot of these actions - their stability is all over the show.
I don't think class actions are a net negative for shareholders - especially one like this, where the claim is based on market misinformation (or the Sons of Gwalia case, where the banks tried to get away with everything that was left of the company at the shareholders' expense). There are others where companies thought they could get away with unconscionable practices (BHP polluting the river below Ok Tedi is one that come to mind, and the class actions over drugs released with inadequate testing are another). We all know companies where the management treats shareholders like mushrooms, and I for one am grateful that it's got harder to do.
In this case, the initial action isn't against the people who were responsible for the stuff-up because they're no longer with the company, but it's possible that the company will pursue them if it loses the case or settles. In lots of other instances, management has ultimately been held to account. In the long run, that has to be a good thing.
OZL Price at posting:
$18.00 Sentiment: LT Buy Disclosure: Held
