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A trading halt has been enforced on ailing etailer SurfStitch, following news that the company had been hit with a $100 million class action lawsuit.

The claim alleges SurfStitch failed to disclose it was trading at a loss in August, 2015 and that it was covered up with a series of transactions to boost revenue and a misleading 2015/16 earnings guidance of $15 million to $18 million.

SurfStitch acknowledged that the claim had been received and stated that the trading halt was necessary for the company to assess the allegations and respond accordingly.

Unless ASX decides otherwise, the company will remain in this state until the commencement of normal trading on Friday 26 May or when the announcement is released to the market.

The company has been in damage control this past week, as it was revealed it planned to double its losses for FY 2017 to a range of $10.5m to $11.5m from the range of $5m to $6.5m.

SurfStitch also announced that it would be removing itself from the North American market.

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