Macmahon Holdings is facing a multi-million dollar law suit from shareholders angry about its alleged delay in telling them about problems with a major project in 2012.
Lawyers for the shareholders have filed a class action against the company in the Federal Court in Sydney, claiming Macmahon breached stock market rules by not telling them about the financial impact of delays with a rail earthworks and bridge project in Western Australia's Pilbara.
ACA Lawyers principal Steven Lewis said shareholders believe Macmahon should have detailed the delays and the financial consequences at least four months before it actually did in September 2012.
Macmahon said in a brief statement that it would vigorously defend itself in court.
The class action centres on a project known as Hope Downs 4, which was part of mining giant Rio Tinto's expansion program in the Pilbara.
Macmahon had planned to start work in October 2011 and finish in August 2012.
However as it announced a record profit in August 2012, Macmahon revealed the project was just 56 per cent complete.
A month later the company stunned investors with a massive downgrade to its earnings forecast, blaming the downgrade on additional costs relating to delays with the Hope Downs project.
Chief executive Nick Bowen quit and Macmahon's shares dived 47 per cent in response to the September 19 announcement.
Mr Lewis said investors who bought Macmahon shares between May 2 and September 18 in 2012 paid too much because of the company's alleged failure to tell the stock market about the financial fallout from delays with the Hope Downs project.
"Macmahon let down investors by not making timely disclosure of the financial impact of the delays and shareholders are understandably angry," he said in a statement.
"The class action is an opportunity for these shareholders to recover losses caused by Macmahon Holdings alleged misleading and deceptive conduct."
Mr Lewis said a "substantial" number of retail and institutional investors had signed up to be part of the class action, which remains open for others to join.
A directions hearing has been listed for December 1.
The legal action comes a week after a large institutional shareholder delivered a "strike" against the company over its executive pay policy during Macmahon's annual general meeting.
Macmahon suffered a full year net loss of $217.9 million in 2014/15.
The company's shares are in a trading halt.
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