Do shares in legal group Slater and Gordon have any value?
Well, judging by yesterday’s surge by 14% at one stage, some punters this so.
The shares eased back in trading during the session but still ended up 9.4% at 8.1 cents after a provisional settlement of a class action against the company was announced.
But the reality is that the share shave little value, except as a tax loss situation.
Slater and Gordon said the settlement for $36.5 million should allow its recapitalisation to proceed – that’s a deal that will destroy most of the value in the company’s existing ordinary shares by lenders swapping their debt for new shares.
The company told the ASX that it had “reached in principle conditional agreement” to settle one class action suit which “will also resolve any and all potential shareholder claims against the Company and its directors and officers.”
That deal was announced on June 30, and under it Slater and Gordon’s lenders, led by New York-based hedge fund Anchorage Capital, will take control of the of the legal group after agreeing to a recapitalisation deal and ousting its chief executive and directors.
The recapitalisation deal was subject to lenders being satisfied the expected settlement of class action lawsuits concerning the company’s disclosure of its financial information in the year since its value destroying purchase of the UK professional services arm of Quindell, now known as Watchstone group (which is now being sued by Slater and Gordon for damages over the deal).
Quindell came under investigation by the UK’s Serious Fraud Office for its business and accounting practices shortly after the 637 million pound deal was settled in 2015, leading to write downs, losses of more than $1 billion and the collapse of the share price and the company to the point where it was only stopped from going into administration by the support of its lenders who will now have control.
Slater and Gordon’s insurers will tip in $32.5 million of the settlement while the hedge funds that hold the debt in the group will contribute $4 million to the settlement.
The settlement is dependent on court approval and the recapitalisation scheme of the group going through.
The settlement will take in shareholders in all current claims against Slater and Gordon. The bulk is expected to go to investors in the main action from Maurice Blackburn. Shareholders had started the class action Slater and Gordon after the disastrous acquisition of Quindell.
