Shares in Vocus Goup have held steady despite a proposed class action alleging the telecommunications provider engaged in "misleading and deceptive conduct" and breached disclosure obligations.
Shares in Vocus, which owns the Dodo, iPrimus and Orcon brands, were hovering at $ 2.41 at 1016 AEST on Thursday.
Law firm Slater and Gordon said the proposed claim would be brought on behalf of hundreds, if not thousands, of people who bought Vocus shares between November 29, 2016 and May 2 this year - including mum and dad investors and large institutional funds.
The claim, backed by litigation funder Investor Claim Partner (ICP), allege that Vocus had no reasonable grounds for its original 2017 financial guidance, issued in November 2016 and downgraded the following May.
It also is alleged that Vocus failed to disclose that it would not achieve the guidance.
As a result, it is claimed that Vocus shares traded at prices significantly above their true value during the period.
Slater and Gordon principal Lawyer Mathew Chuk said investigations to date suggest that Vocus had unreasonable expectations about the costs involved in integrating its newly acquired platforms and technology systems.
He said that Vocus had expanded significantly since 2015 by acquiring other businesses such as Amcom and Nextgen Networks, and merging with M2 Group.
"When Vocus issued its FY17 (2016/17 full year) guidance, it stated that it expected to gain efficiencies by bringing these businesses together, but we allege this was done without proper visibility of profitability," Mr Chuk said in a statement on Thursday.
"We have also identified an accounting issue relating to recognition of ongoing costs associated with the execution of long-term, multi-million dollar service contracts."
ICP chief operating officer Simon Weeks said evidence suggests Vocus was aware of most of the issues when the FY17 guidance was originally issued in November and had therefore misled the market.
"Based on initial interest, Vocus shareholders are perturbed by this, as it is yet another example of a listed company not following the listing rules that exist to protect shareholders," Mr Weeks said.
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