The Brisbane-based investment firm was once valued at over $1 billion at its peak market capitalisation in 2017 — but the company’s value plummeted after it began to emerge in 2018 that Blue Sky may have overstated its financial performance and assets. By May 2019, Blue Sky was in administration.
The class action, filed by law firm Banton Group in the Federal Court this week, alleges that Blue Sky overstated the company’s financial performance and overstated their assets materially in financial reports to members and potential investors between 2016 and 2018.
According to the firm, “the overstatement of Blue Sky’s performance had resulted in the market being misinformed and Blue Sky’s share price being based on an incorrectly inflated reported profit and an overstated net asset position.”
“Had the financial reports been prepared in accordance with the Australian Accounting Standards and the Corporations Act 2001 (Cth) to take this into account, Blue Sky’s financial position would have been materially less. It is the failure to report accurately, and the failure by Blue Sky’s auditors to detect the misstatements, that caused investors to suffer loss and damage,” the firm stated.
Banton partner, Melissa Morgan, told AAP that shareholders suffered losses due to inaccurate information in 2016, 2017 and 2018 financial year's reports from Blue Sky.
"In particular, the assets of the various funds managed by Blue Sky were overstated, resulting in it improperly recognising performance fees that were subject to material risk and that under its accounting policies and the Accounting Standards ought not to have been recognised,” she said.
The class action is also targeting former Blue Sky directors John Kain, Timothy Wilson, Nicholas Dignam, Michael Gordon, Philip Hennessy, Alexander McNab, Kim Morison, Robert Shand, Elaine Stead and Mark Sowerby.
In documents filed with the court, shareholders said "the information in the financial reports was distorted so as to present Blue Sky as being in a more favourable financial position than it actually was.”
"This appearance caused the price at which Blue Sky's shares traded on the ASX to be higher than the price otherwise would have been,” the documents stated.
In addition, Ernst & Young and auditors Michael Reid and Paula McLuskie are also accused of breaching accounting standards and their duty of care by falsely claiming that Blue Sky’s financial position was "true and fair" in their reports.
The class action is for investors who purchased shares between 19 August 2016 and 20 May 2019, and is being funded by International Litigation Partners (ILP).
