Why the London Stock Exchange is no longer a home for the legal sector
A scandal broke out at one of the remaining listed legal groups last week resulting in its share price dropping to its lowest ever level.
Now, it really is the time to draw the line in the sand – the London Stock Exchange is not the place for the legal sector.
RBG Holding was all over the headlines last week after the founder Ian Rosenblatt had to hit back at the board by calling them liars. This came after the group ousted him in an RNS update, along with a range of allegations against him. Both parties have since reached a two-week truce as of last Friday.
RBG Holding, which is made up of two law firms: dispute-focused Rosenblatt and commercial advice specialist Memery Crystal, listed on the London Stock Exchange in 2018.
At its highest point in June 2021, its share price was 148p, but this week, the price is well below 2p.
Back in 2023, the Ince Group, headed by Adrian Biles, was suspended from trading as it missed deadline after deadline for publishing its accounts.
The group eventually fell into administration in April, and since, under its new owners Axiom Ince, has been involved in a scandal over alleged misappropriation of £64m of client money.
While another legal listed business DWF Group was taken private by London-based Inflexion Private Equity Partners in a £342m deal in 2023.
Investors are “no longer interested”
There are four legal groups left on the London Stock Exchange; Keystone Law, Gateley, Knights Group and RBG Holding.
According to data supplied by AJ Bell, on a five year performance review of each, it revealed that RBG’s stock is down by 99 per cent, Knights down by 68 per cent, Gateley down by 37 per cent and Keystone Law down by three per cent.
Speaking to Morning Wire, Dan Coatsworth, investment analyst at AJ Bell said: “The quoted legal sector has been a big disappointment. Investors have lost money and they’re no longer interested.”
He explained that “the average return for the four UK-listed stocks still on the market (Gateley, Keystone Law, Knights and RBG) is -52 per cent over the past five years.”
The least bad performer from that quartet would have still lost money for shareholders, being Keystone Law which is down 3 per cent over the past five years,” Coatsworth added.
He went on to explain that despite DWF receiving a 53 per cent bid premium for its takeover, “the takeout price was below its IPO price”.
Coatsworth warned that “these figures will not entice other law firms to list in London.”
“Investors want to see steady earnings growth but there isn’t consistency. Instead, there is more drama involving this sector than a typical day in a Magistrates’ court,” he concluded.
David Beech, CEO of Knights told Morning Wire, “our IPO provided us with the platform to accelerate our growth strategy and become one of the leading legal and professional services firms across the UK, with strong positions in regional markets outside of London.”
“We now have c.1,100 fee earners across 26 offices, with run rate revenue nearly five times and run rate underlying profit before tax six times the level at listing in 2018,” he added.
However, that isn’t the end of the road for law firms. Law firms, like other professional services, are in the eyes and minds of private equity firms.
Speaking for Eyes on the Law back in December, Sean Lightfoot, partner at Hill Dickinson on private equity in law firms, stated that they are “quite conservative” and take a while for change, but “similar with the accounting market, once it happens, there’s kind of a rush for everyone to do the same thing”.
Eyes on the Law is a weekly column focused on the legal sector.