The Australian promoters of the $177 million Intueri Education Group float on the NZX in 2014, Arowana and its executive chair Kevin Chin, believe the threat of a class action against it has "no prospects of success."
Although the firm of Adina Thorn Lawyers announced in mid-November that it intends to act on behalf of more than 800 investors in Intueri, which went into liquidation in 2017, and has secured backing from litigation funder LPF Group, Arowana hasn't mentioned it to its own shareholders.
And it apparently didn't come up at Arowana's annual shareholders' meeting in Sydney last week, even though Adina Thorn has said the class action could seek to recover more than A$100m for Intueri investors from Arowana, whose shares are trading at A16c, giving it a market capitalisation of A$25.3m.
Asked why it had made no mention of the suit, a spokesperson for the company said it is "confident that the proposed class action has no prospects of success."
The Financial Markets Authority, Serious Fraud Office and the Tertiary Education Commission had all investigated Intueri, Arowana said.
"There was no finding of illegal practices or improper disclosure or mis-statements in the prospectus," the spokesperson said.
"Furthermore, we consider that the law firm promoting the class action and its principal have defamed people associated with Arowana and legal proceedings are imminent."
ASX told BusinessDesk that "the company in the first instance would need to assess the materiality of a class action if it's formally served and consider its disclosure obligations."
However, the Australian stock exchange operator noted the class action is just a proposal at this stage.
Adina Thorn wouldn't say whether it has heard from Arowana, Chin or their legal representatives.
"It's not appropriate for her to comment at this stage," said a spokesman for principal Adina Thorn.
The FMA closed its investigation into Intueri in 2016, saying statements made in the firm's prospectus did not reach the legal threshold of being misleading.
"We did inform the company that aspects of the prospectus could definitely have been clearer. We will, of course, consider any new information that comes to light," the regulator said at the time.
Tim Hunter at The National Business Review sounded the alarm on Intueri in late 2015 when he revealed that the impressive student enrolment and course completion numbers in the prospectus relating to Quantum, a business Intueri acquired with the proceeds of the float, were bogus.
The SFO announced in April 2017 that it had ended its investigation and would be taking no further action.
The TEC hired accounting firm Deloitte to investigate Quantum and it documented that Intueri's prospectus stated that 4,628 students were enrolled at Quantum when it had reported to 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," TEC said in December 2017 when it released the Deloitte report.
Quantum had also exploited loopholes to avoid having to report considerably higher withdrawal numbers, "which would have raised concerns with government agencies."
The TEC noted its analysis showed the practices weren't widespread and that new reporting procedures would prevent them occurring in future.
But once the authorities ended Quantum's rorting of the system, the business was no longer viable.
Arowana took $114.5 million of the float proceeds in exchange for a 75 per cent stake in Intueri and retaining a 25 per cent stake after the float.
Its 2014 annual report shows it booked an A$94.6 million gain from the Intueri float and that Chin was paid a A$13.3 million bonus that year.
Adina Thorn's press statements – a separate statement was issued for Australian journalists but BusinessDesk can find no evidence it resulted in news coverage there – pointed out easily verified facts of this nature, as well as quoting the views on the float of "a senior New Zealand business commentator."
The firm says numerous shareholders and "some institutions" have registered their interest in the proposed class action, but no statement of claim has been filed as yet.