A Melbourne firm has become the first practice to file a shareholder class action against embattled Slater and Gordon.
Maurice Blackburn Lawyers says shareholders saw their investment lose 95% in value between April 2015 and February 2016.
The action centres on the £637m acquisition of UK company Quindell’s professional services division, partly funded by a capital raising from existing Slater and Gordon shareholders.
Maurice Blackburn said the deal raised questions about ‘whether the company’s due diligence process was adequate and whether it provided shareholders with accurate and reliable information about the risks of the acquisition and its value to shareholders’.
It added that shareholders also suffered heavy losses when Slater and Gordon withdrew revenue and earnings guidance weeks after it was reaffirmed, and further losses were incurred when subsequent financial statements suggested the acquisition was under-performing.
The statement of claim alleges that Slater and Gordon made ‘false and misleading statements, engaged in misleading and deceptive conduct, and/or breached its continuous disclosure obligations to shareholders which prevented shareholders from being able to make informed investment decisions based on complete, accurate, and timely information about the Quindell acquisition and the true state of the company’s overall financial position and performance’.
Maurice Blackburn added that, given the amount of lost shareholder value, the compensation sought is expected to be of ‘very significant magnitude’.
Slater and Gordon has experienced a tumultuous 18 months during which its share price value has plummeted.
Shares are trading at A$0.385 on the Australian stock exchange today; a fall of more than 8% in value on the day. In November 2015 it traded at A$3.315. However, even that is significantly down on the share price recorded as recently as April 2015, when shares were worth A$7.85.
Meanwhile, Sydney-based ACA Lawyers says it should be in a position to commence formal proceedings on behalf of Slater and Gordon shareholders ‘over the next four to six weeks’.
ACA says it has received interest from both retail and institutional investors whose shareholding has lost value over the past two years. Total losses of potential claimants are estimated at more than A$100m (around £62m).
ACA announced a potential class action against Slater and Gordon last December and has finance from listed Australian funder JustKapital Litigation Finance and London-based Woodsford Litigation Funding.
The investigation focuses on potential misconduct by Slater and Gordon prior to its April 2015 capital raising, going back as far as the release of its 2014 full year results.
While a draft statement of claim has been prepared ACA is finalising possible amendments based on further issues that have been identified by its advisers. ‘It is important we ensure we identify all losses suffered by shareholders that may be the result of Slater and Gordon’s misconduct,’ said ACA principal Bruce Clarke. ‘We are taking the time to ensure we make the strongest case possible to recover the maximum possible losses on behalf of Slater and Gordon shareholders.’
In a statement to the stock market, Slater and Gordon said it noted reports that Maurice Blackburn intends to file a class action on behalf of its shareholders, but it has yet to be served with the claim.