Estia Health Ltd (ASX: EHE) received Federal Court approval this afternoon to settle a class action brought against it.
The Estia Health share price dipped sharply immediately after the news was announced to the ASX, but has since returned to its prior trading level of $2.50, up 2%.
Estia Health is one of Australia's largest residential aged care providers delivering care to more than 8,000 older Australians each year.
Let's have a closer look at the settlement and class action brought against the company.
Class action
The class action against Estia has been ongoing since July 2019. Filed to the Federal Court by law firm Phi Finney McDonald, it relates to alleged breaches of the company's disclosure obligations in 2015 and 2016.
The lawsuit concerned shareholders who had bought shares in the company or acquired long exposure to Estia shares by entering into equity swap confirmations between August 2016 and October 2016.
At the time, the Australian Financial Review reported the class action alleged Estia didn't disclose difficulties it was experiencing around the time it published its 2016 financial year results. It also alleged the company gave misleading guidance for the 2017 financial year.
In February 2021, Estia advised the market it had reached an agreement to settle the class action, conditional on whether the settlement would receive Federal Court approval.
Today, Estia said that the cost of the settlement is $38.5 million, of which it has contributed $12.35 million. The remaining balance is to be paid by Estia's insurers.
Estia Health share price snapshot
The Estia Health share price has been a strong performer on the ASX lately. Currently, it's up 41% year to date and has lifted 72% over the last 12 months.
The company has a market capitalisation of around $640 million, with approximately 261 million shares outstanding.
