Class action alleges FY25 earnings and margin guidance left them in the dark on key risks
Slater and Gordon Lawyers has filed a shareholder class action in the Supreme Court of Victoria against Web Travel Group Ltd (ASX: WEB) (Web Travel), a global B2B travel services company.
The specialist plaintiff firm, with a long history in class actions and personal injury law, has commenced the proceeding on behalf of the lead plaintiff, a self-managed super fund, and other investors who acquired Web Travel shares between 21 March 2024 and 13 October 2024 (inclusive).
The class action alleges that Web Travel misled investors about its FY25 earnings and margin guidance and failed to comply with its continuous disclosure obligations.
Following Web Travel's 14 October 2024 announcement revising its margin expectations, the company's share price fell by approximately 37.7 per cent over four trading days, slashing about $1 billion from its market capitalisation.
The proceeding is part of Slater and Gordon's broader work in using the law to rebalance power, support fairer and more transparent markets, and help investors access the justice they deserve when companies fall short of their obligations.
Alleged mismatch between Web Travel's growth story and margin reality
Over the relevant period, Web Travel promoted a growth strategy built on increasing Total Transaction Value (TTV) while assuring investors as to its resulting revenue margins.
At its strategy day on 21 March 2024, Web Travel told investors that its TTV margin would "settle in the short term at c.mid-7%". The company repeated this statement during its FY24 results announcement on 22 May 2024.
This narrative unravelled on 14 October 2024 when Web Travel told investors that it now expected its TTV margin to "stabilise at c.6.5%", which the class action alleges caused significant losses to shareholders.
The statement of claim alleges that:
Web Travel knew, or ought reasonably to have known, that the strategies it adopted to grow its TTV meant that Web Travel could not reasonably achieve a TTV margin that would settle in the short term at circa 7.5%;
the company lacked reasonable grounds for the earnings and margin guidance it provided to the market;
the alleged misconduct caused the market price of Web Travel shares to be greater than it otherwise would have been; and
had the information about the TTV margin been properly disclosed, group members would not have purchased Web Travel shares at the prices and in the volumes they did, or in some cases, would not have purchased the shares at all.
The class action alleges that Web Travel engaged in misleading or deceptive conduct and breached its continuous disclosure obligations, in contravention of relevant provisions of the Corporations Act 2001 (Cth), ASIC Act 2001 (Cth), Australian Consumer Law and the ASX Listing Rules in relation to its FY25 earnings and margin guidance.
Market integrity and investor confidence
Slater and Gordon Class Actions Practice Group Leader Nathan Rapoport says everyday investors and fund managers put hard-earned money on the line based on what companies tell the market about growth, earnings and risk.
"Investors are entitled to expect that listed companies comply with their disclosure obligations and that any earnings guidance they give is grounded in reality. When expectations are overstated or risks are glossed over, it is investors who bear the loss," Mr Rapoport said.
"Our continuous disclosure laws exist so investors receive fulsome, timely information. Listed companies must have reasonable grounds for the guidance they provide and promptly update the ASX when expectations materially change. Our market depends on that discipline.
"Shareholder class actions play an important role in a mature market. They allow investors to come together to hold companies to account when things go wrong, restoring confidence in the system, lifting standards and giving investors a way to get redress."
Mr Rapoport said the proceeding alleges that Web Travel continued to promote a growth strategy and margin profile that it knew, or ought to have known, could not be sustained on the terms presented to the market.
"If risks to revenue and margins are not properly disclosed, investors are denied the chance to price that risk appropriately. That undermines confidence in our continuous disclosure regime."
