Slater & Gordon is facing a class action now from its rival. Photo: Jessica Shapiro
Struggling law firm Slater and Gordon is now facing a class action by rival Maurice Blackburn.
Maurice Blackburn released a statement on Wednesday saying that it was “opening registrations to aggrieved shareholders wanting to pursue a class action”.
Slater & Gordon’s shares have fallen around 90 per cent in the past 12 months, after a series of questions about its accounting practices and the performance of its British legal services business, Quindell, which it acquired in March for $1.3 billion.
Slater & Gordon has been subject to major investigations by regulators in Australia and Britain.
Maurice Blackburn said in a statement: “The decision has been made after long and serious consideration of the series of events that have plagued [Slater & Gordon] this year.”
The class action will be open to people who purchased shares between April 1 and December 16. Shareholders who purchased during that period but have since sold out are allowed to participate as per usual class action practice.
Analysts recently suggested Slater & Gordon could undertake an emergency capital raising and cull its dividends to keep its bankers at bay after its planned write-down of goodwill.
Slater & Gordon noted the recent media statements regarding law firms announcing investigations into the viability of shareholder class actions in a statement to the Australian Securities Exchange
“The company has not been notified of any legal proceedings,” the statement read. “Slater and Gordon will continue to monitor the situation and update the market if necessary.” The law firm also confirmed it would not represent itself if the class action did go ahead.
Maurice Blackburn principal Jacob Varghese told a press conference on Wednesday morning Slater & Gordon had lost $1.8 billion in shareholder value over the past year and there were thousands of aggrieved shareholders.
“On five occasions this year shareholders have been shocked by bad news about the company that has led to immediate falls in the share price,” Mr Varghese said.
“That happens once it’s a tragedy, that happens twice it’s a farce, that happens three, four and five times and you’ve got to start asking serious questions about the quality of governance and the internal accounting systems,” Mr Varghese said.
The focus of the class action will be whether the company had grounds to issue its 2016 full year guidance on August 28 and its decision to reaffirm the guidance most recently as November 30. The company suffered another share price fall on December 17 when it decided to walk away from its earnings guidance. The class action will also look at the Quindell acquisition and the company’s accounting practices.
Mr Varghese noted the irony of Maurice Blackburn launching a class action against Slater & Gordon which it competes with in the class action space.
“In terms of Slater & Gordon main practice they are a law firm that works for plaintiffs and that is something we should all have respect for because we’re all in the same boat,” Mr Varghese said.
“But Slater & Gordon runs a very different business to Maurice Blackburn they’re a listed company and as a listed company they have obligations to shareholders to keep them in their confidence to tell them how the business is going because important decisions are made to allocate capital on the basis of an assumption that the market is fair and the companies participating are transparent,” Mr Varghese added.
Slater & Gordon and other market participants have put some of the blame on the law firm’s share price fall on a battle between the company and short sellers who have been profiting by betting on the company’s share price falling.
Mr Varghese said Maurice Blackburn would investigate the role short sellers have played in the falls in Slater & Gordon’s share price.
“But that’s not the nub of any issue that will be in a shareholder class action. The shareholder class action will be about the timeliness about the release of information,” Mr Varghese said.
Meanwhile, ACA Lawyers is also in the preliminary stages of preparing a class action though it is yet to formally launch an action.
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