ACA Lawyers has obtained funding to mount a class action against mining services firm WorleyParsons, claiming that it lacked transparency around the company's performance last year.
ACA said that it had reason to believe WorleyParsons withheld sensitive market information ahead of a 26 per cent crash in its share price in November last year.
More than $1.3 billion was wiped off the company’s market value following an earnings downgrade on November 20 2013.
“The class action will allege that WorleyParsons shareholders suffered significant losses after the company failed to comply with its continuous disclosure obligations and engaged in misleading and deceptive conduct,” ACA principal Craig Allsopp said.
ACA said it was continuing due diligence on the action and expected to file a statement of claim in the Federal Court before the end of the year.
In August 2013, WorleyParsons released its FY2013 annual report and provided guidance that earnings would increase in the 2013-14 financial year.
However ACA said the earnings downgrade came just six weeks after the company told shareholders at its October 2013 annual general meeting that earnings would increase in FY2014.
Mr Allsopp said it was another example of a major public firm happy to spread the good news but sweep the bad news under the carpet.
“The class action will seek compensatory damages on behalf of WorleyParsons shareholders who acquired these shares between August 14 2013 and November 19 2013,” he said.
ACA said that in the legal proceedings shareholders would allege WorleyParsons had information by at least August 2014 that deteriorating market conditions and project delays would impact earnings in the financial year ending June 30 2014, but did not reveal the problems until November 2013.
Litigation Lending Services has funded the proposed action.