The WiseTech Global Ltd (ASX: WTC) share price is back in focus on Wednesday amid the news of a class action against the company.
While the news isn't price-sensitive, investors should consider whether it will have meaningful implications for one of Australia's largest listed technology companies.
Zooming out, the WiseTech share price has faced challenges in the past few months amid a series of allegations around founder and now former CEO Richard White.
Shares hit lows of $99.37 on 24 October, sliding from highs of $133.55 a week prior.
WiseTech stock has since reclaimed just about all of these gains and is now swapping hands at $133.21 at the time of writing. Let's take a closer look.
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Wisetech share price in focus amid class action
The WiseTech share price sank in October amid the reports surrounding founder Richard White's personal conduct.
Investors of all shapes and sizes unloaded the stock before it made a swift recovery.
Now, Law firm Phi Finney McDonald has announced a class action in the Supreme Court of Victoria against the company.
The firm is representing Wisetech shareholders who acquired shares between August 2019 and February 2020.
The lawsuit claims Wisetech misled investors with overly optimistic FY20 financial guidance despite integration challenges associated with its ambitious acquisition spree.
The class action alleges that WiseTech breached its continuous disclosure obligations and/or engaged in misleading or deceptive conduct by providing its FY20 guidance on 21 August 2019, and reaffirming that guidance in October and November 2019, without reasonable grounds.
The class action alleges that investors who acquired WiseTech shares during the Claim Period are entitled to compensation for loss and damage as they paid more for those shares than they ought to have paid as a consequence of WiseTech's conduct.
The class action also alleges that some group members would not have purchased WiseTech shares if WiseTech had complied with its obligations.
WiseTech's original 2020 guidance projected pre-tax earnings of $145 million to $153 million.
It did so in the previous year – 2019 – equalling a forecasted growth of 34% to 42%.
This guidance was reaffirmed in October and November 2019.
But then, in February 2020, WiseTech revised down its guidance to a range of $114 million to $132 million, a $31 million to $21 million slice in forecast, respectively.
As a result, its share price tumbled more than 27% in a single day and dropped an additional 11% the next day.
While this is a big drop, we can't forget the obvious, pathogenic, elephant-sized virus in the room: COVID-19.
None one saw that coming, not even some talking heads on financial news sites who pretend to have a crystal ball. It was unprecedented.
But it's not just the forecasts during this period that have shareholders offside.
Allegations of misleading disclosure
According to the claims, WiseTech was also facing delays in integrating its newly acquired businesses, including CargoWise.
Yet, it continued to assure the market that its financial performance remained on track. This caused the WiseTech share price to be volatile during the period in question.
Phi Finney McDonald also argues that WiseTech issued its 2020 guidance without "reasonable grounds" because it failed to fully disclose the risks associated with integrating these businesses.
The firm claims WiseTech's aggressive acquisitions — around 40 companies during the 2015–2020 period — put undue strain on the company's ability to meet its targets.
All of this caused investors to unload shares at lower prices, Phi Finney Mcdonald claims.
WiseTech has publicly addressed the class action announcement, stating it has not yet been served with any official court proceedings.
It says it will "vigorously defend" the proceedings.
Foolish takeaway
The WiseTech share price has reclaimed most of its October losses and is up almost 77% this year.
It has climbed more than 111% in the past 12 months. How the potential class action will impact the share price is yet to be seen.
