The class action against Intueri Education Group and its promoters, including ASX-listed Arowana, has signed up about 300 retail and institutional shareholders with losses of about $50 million.
The class action arising from Intueri's $177m float on NZX in 2014 is represented by Adina Thorn Lawyers and backed by NZ-based litigation funder LPF Group.
The class-action intends to target Arowana and certain former Intueri directors who promoted the $2.35 per share initial public offering in which about 800 investors participated.
Intueri went into liquidation in 2017.
"The response from both retail and institutional shareholders has been positive. This is not surprising – shareholders seek redress for the losses they have suffered. The statement of claim is expected to be filed in the new year," said Adina Thorn Lawyers in a statement.
Arowana hasn't said anything about the potential class action to its shareholders yet and the subject didn't come up at its annual shareholders' meeting in late November. Arowana told BusinessDesk it is "confident that the proposed class action has no prospects of success."
Arowana has also accused the law firm and its principal, Adina Thorn, of defaming people associated with it. Thorn told BusinessDesk she can't comment on whether she has heard from Arowana.
Intueri has been investigated by the Financial Markets Authority, Serious Fraud Office and the Tertiary Education Commission but none have taken any further action. The FMA closed its investigation in 2016 and the SFO closed its probe in April 2017.
However, since then a report by accounting firm Deloitte, which had been hired by the TEC to investigate, documented that Intueri's prospectus stated that 4,628 students were enrolled at Quantum when it had reported to the TEC that it had only 1,800 students.
Quantum had built its business model to take advantage of differences in government agency reporting mechanisms to allow it to retain a significant amount of student fees without having to deliver training to these students, the TEC said when it released the Deloitte report in December 2017.
It also said Quantum exploited loopholes to avoid having to report considerably higher withdrawal numbers, which would have raised concerns with government agencies.
TEC noted its analysis showed the practices weren't widespread and that new reporting procedures would prevent them occurring in futur