Shareholders in A2 Milk have filed a class action alleging the company gave misleading earnings forecasts which caused them financial loss.
The New Zealand milk supplier has lowered its earnings forecast four times since September last year as infant formula sales flagged in China.
Shares were trading for about $16 in September last year but have steadily fallen.
On Wednesday, shares on the ASX were down more than seven per cent to $6.06 at 1532 AEDT.
Slater and Gordon lawyer Kaitlin Ferris said the full-year earnings forecast for the 2021 fiscal year did not show consideration of factors that could have affected performance.
The company tried to improve sales by selling English label formula tins to China online. However this led to fewer sales to resellers, who found less demand.
Ms Ferris said the repeated earnings downgrades showed the company had systemic issues in its distribution network much earlier.
A2 Milk said it had complied with disclosure obligations, denies any liability and will defend the class action.
The claim has been filed with the Supreme Court of Victoria.
Participants include those who bought A2 shares on the ASX and NZX between August 19 last year and May 9 this year.
In May, A2 Milk said its significantly lower earnings outlook was due to fewer sales, excess stock and the cost of new software.