The action, launched in the Federal Court by law firm Phi Finney McDonald this week, alleges Estia breached market disclosure obligations in 2015 and 2016 when it assured shareholders its growth strategy was “on track” despite troubles integrating newly purchased facilities.

Estia’s shares soared to a record-high $7.33 after it upgraded its FY16 guidance following the acquisition of Kennedy Health Care in late 2015.

But a below-expectation FY17 outlook in August 2016, and a subsequent guidance downgrade two months later, sent the company’s share price tumbling by more than 45 per cent.

The company’s share price hit a historic low of $2.06 in October last year

Estia admitted it had poorly handled the integration of the Kennedy acquisition during FY16, which in turn had a negative impact on its FY17 performance.

Phi Finney McDonald director Tim Finney said Estia had been unable to reliably estimate its future financial performance due to a new and untested operating structure.

Mr Finney said the company also misrepresented the proportion of incoming residents that had opted to pay it a Refundable Accommodation Deposit, which Estia relied on to fund its growth strategy.

“The claim seeks to hold Estia accountable for conduct which caused its securities to trade at an artificially inflated price,” Mr Finney said.

The claim is being funded ICP Capital with Litigation Lending Services.

Estia’s share price fell by as much as 4.69 per cent to $2.64 by 1145 AEST on Wednesday.

In a release to the ASX, Estia said it would vigorously defend the proceedings.

The company said it was not in a position to say whether the action was likely to have a material impact on its financial position or performance.

Estia reported in May that it would likely miss FY19 guidance due to costs associated with the aged care royal commission, as well as costs linked to opening and closing facilities, and reduced earnings from mature homes.