Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site. Click here to give us your advice and feedback.

Austal (ASX:ASB) share price falls on ASIC action

The Austal Limited (ASX: ASB) share price has been hit with legal proceedings. What does this mean for the Austal share price?

The Austal Limited (ASX: ASB) share price has been hit with legal proceedings. What does this mean for the Austal share price?

Austal designs, manufactures and supports high-performance shipping vessels for commercial and defence customers worldwide.

ASB share price

Source: Rask Media ASB 2-year share price chart

Why ASIC has filed legal proceedings

The Australian Securities & Investments Commission (ASIC) announced it has commenced proceedings in the Federal Court against the company and its former CEO, David Singleton.

The proceedings relate to the alleged failure by Austral to immediately disclose to the market a material change in its prior earnings guidance.

Austal had represented that it expected its US shipbuilding business would be profitable in FY16 but subsequently became aware that it would likely generate a significant loss.

Mr Singleton, who was the CEO at that time, is alleged to have contravened Sections 180(1) and 674(2A) of the Corporations Act 2001.

In non-legal terms, the alleged misconduct relates to Mr Singleton’s involvement in Austal’s continuous disclosure contravention and by failing to exercise reasonable care and diligence as a director.

What now for Austal?

The outcome of these proceedings may result in pecuniary penalties from the Federal Court and there is a range of outcomes.

If Austal is found to have breached Section 674(2A) (continuous disclosure) then it would also be in breach of ASX Listing rule 3.1.

According to this ASX listing rule, Austal may be liable for a civil penalty of up to $1 million. Austal may also be liable to pay damages to any person who suffers loss or damage as a result of the breach.

In the statement filed by ASIC in the Federal Court, it notes total shares of around $31 million were traded during the period of the alleged misconduct.

In such circumstances, the most prudent approach would be to obtain a legal opinion and assign probabilities to a range of scenarios. It seems the worst-case scenario could result in a civil penalty of $1 million and potential damages of $31 million.

I’m no legal expert but forecasting is an important skill to hone in investing as well as having a thesis.

This case reminds me of the importance of management quality, which is what I look for as part of the Rask Investment Philosophy.

If you’re on the hunt for ASX small-cap shares, check out the Rask Rockets Beyond program. You might want to hurry – the mission is opening to new members tonight!

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned
Skip to content