Law firm Slater and Gordon faces a $250 million class action, the largest by shareholders in Australian legal history.
The company’s shares fell 7% to $0.39 on the news.
Last year they hit a high of $8.07, valuing the world’s first stock exchange-listed law firm at $2.8 billion. But they have been on a steep slide because of its underperforming UK business and the British government plans to limit compensation for road accidents.
Maurice Blackburn Lawyers says it’s filing the class action today on behalf of more than 3000 investors, including some of the largest institutional investors and super funds.
“The sheer scale of the alleged wrongdoing, its impact on the share price and the number of shareholders affected mean that this case will be one of Australia’s largest shareholder actions,” says Andrew Watson, national head of class actions at Maurice Blackburn.
“In addition to the hundreds of millions of dollars in losses our registered clients have suffered, we’re also protecting the interests of all other relevant shareholders by filing an open action, bringing the total claimed losses to more than a quarter of a billion dollars.”
Slater and Gordon says it has not yet been served with the class action claim.
The case alleges there were problems within Slater and Gordon extending beyond its acquisition in the UK of Quindell’s Professional Services Division.
Maurice Blackburn say there were multiple occasions that Slater and Gordon didn’t disclose material information to its shareholders in a timely manner.
The share market was shocked at bad news coming out of the company which led to more than $2 billion being wiped from the value of its market capitalisation.
Maurice Blackburn says the first half results released in February this year showed a $958.3 million loss including a $814 million impairment to the value of the acquired UK business.
The company shares dropped almost 60% in two days.
“They didn’t just miss their earnings guidance predictions, they were miles off, and that suggests systemic issues across the company,” Watson says.
“The problems that are currently known, and there are many of them, might be just the tip of the iceberg.”
Matt Hall, a Slater and Gordon shareholder, is leading the class action on behalf of the thousands of aggrieved shareholders.
“As an investor in listed Australian companies, I rely on the timely disclosures that listed companies make, and I act on primary information coming out of companies, such as the repeated positive disclosures Slater and Gordon made to investors,” says Hall.
“When those disclosures aren’t accurate, or are misleading, the result can be devastating for individuals who invest as I do, and for individuals that are directly affected when their fund managers lose out because the market isn’t properly informed or properly priced.”
Slater and Gordon is currently reorganising and cutting costs, meaning redundancies in the UK where it has 3950 of its 5350 staff.
In August, the company posted an annual loss of $1.017 billion, including a $879.5 million non-cash impairment against the value of goodwill in its UK business.
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