AFR
Quintis class action alleges breach of continuous disclosure
by
Vesna Poljak
A Federal Court action brought against sandalwood grower Quintis is relying on the definitions of awareness outlined by the ASX's listing rules to allege that
the company knew of the termination of the Galderma supply contract.
Galderma's early termination of the 20-year contract for the supply of pharmaceutical-grade sandalwood oil, and Quintis' disclosures in relation to that agreement, sparked a precipitous drop in the company's market value, and the shares have not traded since May's confidence-sapping revelation.
Quintis also missed its interest payment to bondholders in August.
The Perth-based group is now months
into recapitalisation talks to save the business.
The statement of claim lodged by Quintis shareholder Andrew Wyma earlier this month forms the basis of a class action brought by Bannister Law on behalf of investors in the former TFS, alleging that Quintis breached continuous disclosure rules.
The plaintiff references public statements made by Quintis, especially its response to the ASX's inquiries submitted June 6, and is anticipating further information will be made available via discovery.
The company has previously said regarding the action: "If the current board and current senior management had been aware of the termination at the time it was signed, it is likely that the company would have made an ASX announcement to that effect." Although the deal was "economically immaterial" to earnings, Quintis agrees it "had previously been widely discussed".
But Mr Wyma submits that the Galderma deal was "of economic significance". It was also information "that a reasonable person would expect to have a material effect on the price or value of Quintis shares", the claim says.
Further, at the time the agreement was concluded, Quintis was "aware" of this, it is claimed. ASX listing rule 3.1 requires a company to "give ASX immediately any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity's securities".
This assertion is made even if that awareness was limited to Santalis, the wholly owned pharmaceutical unit of Quintis which was the counterparty engaging with Galderma, because of
the direct reporting structure that Quintis has described linking the management of Santalis to Perth.
Bannister Law's action spans investors who bought the stock from November 30, 2016 to May 10, 2017.
Quintis made headlines when US short-seller Glaucus Investments publicly targeted the company and alleged in contested research that the stock was worthless and had aspects similar to a Ponzi scheme.
In refuting Glaucus' claims, which it did forcefully at the time, Quintis admitted that its biggest customer in China had not placed a single order for timber this year, amid a broader crackdown on sandalwood importation and duty avoidance by Chinese authorities.
The fallout was two-fold: Quintis shares dropped sharply in response, and its founder and serving managing director, Frank Wilson, resigned to pursue a privatisation with an undisclosed investment partner.
Meanwhile, the market began to better understand the company's unique liabilities. A put option held by hedge fund Davidson Kempner had the capacity to topple Quintis had it been exercised given the rate the business was running down cash (that option has been rolled and delayed).
In May, it emerged that Quintis had lost Galderma as a customer, a lapse the company has yet to recover from.
Read more:
http://www.copyright link/business/...uous-disclosure-20170915-gyid0n#ixzz4syfRWLbl
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