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Legal threats mount against Bellamy's

AAP logoAAP 15/12/2016 Petrina Berry

Baby formula maker Bellamy's is facing a string of class actions connected to its negative trading update that led to more than $500 million being wiped from its market value.

The company has been accused of failing to properly disclose to investors the risks of China's regulatory changes on the company's revenue.

Maurice Blackburn, Slater and Gordon and ACA Lawyers are each investigating separate class actions against the Tasmanian-based baby food company.

Bellamy's announced on December 2 that sales in China had failed to meet expectations, and annual revenue was expected to fall from the previous financial year.

Regulatory changes in China, which included restrictions on the number of baby products companies are allowed to sell in China, had triggered discounting by rivals and impacted Bellamy's sales, the company said.

Shares in Bellamy's almost halved in value in a single day, and within two days its market value had plunged by more than $500 million.

The shares, worth $12.13 before the December 2 trading update, have been halted from trade at $6.68.

Maurice Blackburn class action principal Ben Slade said Bellamy's should have informed the market of the risks of regulatory changes earlier.

"There is good reason to suspect that Bellamy's knew or ought to have known about the expected impact of the regulatory changes much earlier than when it ultimately informed the market," Mr Slade said.

"Our investigations will consider whether Bellamy's breached its continuous disclosure obligations, engaged in misleading or deceptive conduct, or made misleading statements."

Slater and Gordon senior class actions lawyer Mathew Chuk also said Bellamy's had failed to properly disclose the company's risks and challenges to the market.

"Bellamy's had a reputation as a quality company selling quality product," Mr Chuk said.

"Our investigations to date suggest that the company prioritised preserving that reputation at the expense of properly disclosing to investors the risks and challenges that the company was facing at home and in China."

He said the law firm was also investigating whether Bellamy's repeated statements to the market since April 2016 regarding its likely performance in China had the effect of misleading shareholders.

ACA Lawyers senior principal Bruce Clarke said the firm's lawyers were currently talking to Chinese food regulatory advisers and several Australian and international litigation funders in relations to Bellamy's conduct.

Bellamy's was due to release a second trading update by Wednesday, but has requested a trading suspension for its shares that stands to December 21.

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