Posted Feb 29, 2016 12:05 pm CST
The first law firm to go public may be on the verge of collapse after reporting a loss of nearly $700 million during the second half of 2015.
On Monday, the Herald Sun (sub. req.) reported that Australia-based firm Slater and Gordon must present a plan to several banks in Australia by the end of April; otherwise the firm could face a deadline as early as March 2017 to repay its debt. John Skippen, Slater and Gordon’s chairman, apologized to shareholders during an earnings call to go over the firm’s financial performance. Skippen also revealed that he and chief executive Andrew Grech both considered resigning, but opted against it, citing a need for stability.
According to the Herald Sun, the firm’s financial woes are serious. In December, the firm took a AU$876.4 million (approximately $676 million) write-down during the second half of 2015 with the vast majority of it being related to a slowdown in business in the United Kingdom. This was in stark contrast with the second half of 2014, when the firm reported an AU$49.3 million profit. A major part of the firm’s problems stem from its April 2015 purchase of U.K.-based insurance claims processor Quindell’s legal services arm for a whopping AU$1.3 billion ($928 million) in the hopes of cashing in on the lucrative car accident market. New proposed laws in the U.K. designed to crack down on fraudulent claims has caused a huge slowdown in business for the firm. According to the Herald Sun, the firm’s stock has taken a nosedive of nearly 40 percent after a trading suspension was lifted.
“The decline in business performance in the U.K. is of serious concern to all at Slater and Gordon and equally will be of concern to our investors,” Grech said during the earnings call.
The firm also faces multiple shareholder suits as a result of its financial performance. The Herald Sun reported that at least two rival law firms, Maurice Blackburn and ACA Lawyers, have indicated that they are close to class action lawsuits against Slater and Gordon. “Mum and dad investors and the company’s own staff took up shares in the rights issue in reliance on what the company said. It now looks like they have done their money,” ACA Lawyers principal Bruce Clarke said.
In the meantime, the firm will be looking to avoid the death spiral that ensnares many failing law firms. “The big question for the company is whether it can survive at all, really … they’ll be relying on lenders to give them some breathing space to keep continuing,” market strategist Angus Nicholson said to the Herald Sun.
ABAJournal.com: “Will first law firm to go public face a shareholder suit? Stock prices seesaw with whiplash plan”
ABAJournal.com: “Andrew Grech: Taking Stock”
ABAJournal.com (2008): “1st Birthday of 1st Publicly Owned Law Firm, Slater & Gordon”