In light of the SMH article today on Gadens "investigating" a class action agaisnt ISX on behalf of shareholders, here's a few useful facts for all to be aware of:-
Please bear in mind this is before considerating the merits of the class action, of which I am EXTREMELY sceptical
1. Gadens is an unexceptional law firm 2. Gadens is not a litigation funder 3. Gadens makes money by charging its lawyers out on a fee for service rate 4. Gadens must advertise to ISX shareholders to attract some/enough as claimants (=SMH article today) 5. If Gadens can get enough ISX shareholders, then they can go to a litigation funder (eg IMF Bentham) to finance the case 6. If not enough shareholders sign up then then Gadens will not be able to find a funder, so they will not commence the case 7. Because Gadens will not be able to rent their staff out on a fee for service basis as there is nobody to pay the bills
If enough shareholders did sign up:-
8. A litigation funder would fund all of Gadens legal fees during the case 9. A litigation funder would want (subject to negotiation) say 40-70% (lets say 60%) of the "win" proceeds at the end of the case 10. The balance of the "win proceeds" (say 40%) would then go to the ISX Shareholders that signed up
Therefore, court appointed damages becomes essential
11. If the claim is small then the damages are small and, whilst in Gaden's interests (they are just trying to secure work for their lawyers), it isn't in the interests of a litigation funder (too small of a payout for too much risk) nor ISX shareholders ( you just stuffed your own company for a tiny and uncertain cheque)
So the merits of the claim becomes extremely relevant.
I believe Gaden's are focusing on the profit forecast of $10.7m being revised to $6.5m as a result of the ASX suspension.
Hmmmmmmm. yawn. how many companies are forced to reissue guidance?
Maybe Gadens would be better off looking at travel companies forced to reissue (upcoming guidance) eg corporate travel (hat tip joe aston) due to the corona virus et al
Either way, in my opinion, this class action marketing material and corresponding SMH article is laughable and further designed to besmirch the reputation of ISX to justify the unfair treatment it has (potentially) received at the hands of the ASX
