A2 Milk or A2M is a fresh milk and infant formula company that sources, produces and supplies A2 brand milk. The firm operates in Australia and globally. A2 Milk holds the mantle as the only producer of fresh cows’ milk that naturally contains the A2 protein.
The A2 milk stocks price was going from strength to strength prior to the pandemic. However, the company has been under pressure since July 2020. This is amid a rapidly changing infant formula market and the “Daigou channel” in China. The A2M share price has plummeted more than 70% in the 15 months since.
As of the time of writing, A2 milk stocks are being exchanged for $6.32 apiece. The shares are slightly 0.16% up since the early session. Year-to-date, A2 Milk share prices are on a slippery slope, down -44.8%.
Why are A2 Milk Shares Trading Low on the ASX?
The A2M share price paused today at around $6.3 as the company announced it’s been hit with a second-class action. Shine Lawyers is taking the company to the Supreme Court of Victoria on claims comparable to those filed by Slater and Gordon Lawyers last month.
The latest case claims that the firm should have updated the market on the extent of pandemic-induced and, allegedly, company-exacerbated disruptions sooner. Shine Lawyers alleges A2 Milk breached its continuous disclosure obligations and failed to properly disclose trade plans. It is claiming such conduct was misleading and deceptive.
Shine Lawyers state that A2 Milk should have known the extent of the impact of COVID-19 and other disruptions had on its trade before the 19th of August 2020. This is the day the company released its financial year 2020 results and the FY21 guidance.
According to Shine Lawyers, A2M ought to have been aware that their FY21 guidance, and subsequent representations, did not adequately consider a few factors known to A2M which ultimately impacted the company’s financial performance, resulting in a 44% plus drop in market value throughout FY21.
These factors are said to include a drop-in “Diagou”, or reseller, sales. The plaintiff states the drop was also partly due to A2 Milk marketing its infant products directly to the Chinese market.
The move allegedly undercut its “Daigou sales”. Therefore, this potentially decreased demand for direct orders and, as a result, cross border e-commerce channel business.
The A2 Milk share price started FY21 trading at $18.72. Over the following 12 months, it fell to just $6 per share. The class action is open to investors who bought A2 Milk shares between the 19th of August 2020 and the 7th of May 2021. A2 Milk downgraded its guidance for FY21 four times between the release of its FY20 results.