Vocational training and education business Vocation Ltd (ASX: VET) has seen its share price slump more than 75% since mid-October after it announced that the Victorian government was to pull $20 million of funding from some of its training programs and Registered Training Organisations.
The fallout from this shock news has continued with today's announcement that the group's chairman and formal federal education minister, John Dawkins, has resigned. The decision was partly in response to shareholder pressure for change at the top, although chief executive Mark Hutchinson seems set to soldier on.
Dawkins' experience, industry knowledge and relationships with regulators and funding bodies was important to the business and the resignation may not be good news for frustrated shareholders.
Vocation's new chairman will be Doug Halley the current chairman of S&P / ASX 100 (Index: ^AXTO) (ASX: XTO) business DUET Group (ASX: DUE). Top of the new chairman's to do list will be defending several legal claims against the group commenced by upset shareholders.
Vocation is being accused by a Victorian solicitor of breaching its continuous disclosure obligations under under the Corporations Act and misleading and deceptive conduct in issuing its prospectus dated 27 November 2013. Class action specialists IMF Bentham Limited (ASX: IMF) are also filing an action on behalf of shareholders.
Presumably if a court upholds that Vocation engaged in misleading conduct in issuing its prospectus then it would face deep trouble due to the widening field of eligible claimants. This factor is what may be behind today's sell off which has seen the stock hit an all-time low.
The business clearly has a fight on its hands, but would presumably have a strong defence to the accusation that it engaged in misleading conduct in issuing its prospectus. It may also have a reasonable defence to other legal actions around continuous disclosure prior to the announcement of the pulled funding. Presumably it would need to be proven that Vocation was in receipt of information to suggest the audit of its Victorian operations was highly likely to lead to material changes to its business outlook. Much will depend on the known unknowns around the legal actions.
Given the big risks no serious (or sane) investor would stake a significant proportion of their available capital on Vocation, although a highly speculative position at 52 cents remains an option.
