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Slater and Gordon: What happens when the ambulance chasers crash

Slater & Gordon chief Andrew Grech was the architect of the public listing. Photo: Arsineh Houspian Slater and Gordon faces an uncertain future. Photo: Lee Besford
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Maurice Blackburn’s Andrew Watson is leading a class action against Slater & Gordon. Photo: Supplied.

Whiplash often follows a car accident after the passengers’ bodies are thrown forwards and backwards. With no physical symptoms, it can be hard to prove or disprove.

Drivers in the United Kingdom seem to suffer it more than others, with whiplash making up about 70 per cent of all post-accident claims from 2008 to 2013.

Suspecting this unusually high rate of whiplash had more to do with exaggerated claims than weak neck muscles, the British government announced last year that people could no longer get cash compensation for minor whiplash claims. Further, it was increasing the upper limit in the small claims court to £5000 ($9675), removing the need for lawyers.

And with that, the British government totally smashed the value of a conglomerate business previously called Quindell, which Melbourne-based law firm Slater & Gordon had just bought for a whopping $1.2 billion.

Now it’s Slater & Gordon shareholders who are suffering whiplash.

Shares that were trading at $7.85 less than a year ago closed at 26 cents on Wednesday before recovering to 38 cents by Friday early afternoon. That means the market value of Slater & Gordon has dropped from $2.7 billion to $135.7 million. Disaster was months in the making

But this car crash started well before Monday. It started in early 2015 when Slater & Gordon first announced it was in talks to buy sections of Quindell as part of a grand plan to become the biggest personal injury law group in the UK. As the first law firm in the world to list on a sharemarket, Slater & Gordon had a history of growth through acquisitions.

It floated at $1 a share and enjoyed eight years of full-speed growth to reach a peak of $7.85 a share on April 2, 2015.

But then the Quindell acquisition started pushing the share price into a downhill spiral.

First, analysts started questioning the underlying value of Quindell.

This scepticism was backed up in June, one month after the transaction was completed, when it emerged that both Slater & Gordon and Quindell were being checked by their respective financial regulators. Slater & Gordon’s shares went off a cliff – dropping from $6.11 to $3.78 in six days.

In the UK, the Financial Conduct Authority was investigating public statements Quindell had made about its accounts in 2013 and 2014, which was followed with reviews by the Financial Reporting Council and a criminal investigation by the Serious Fraud Office.

Meanwhile in Australia, the Australian Securities and Investments Commission was going through Slater & Gordon’s audited accounts. It has completed that inquiry without any further action following changes in accounting methods.

Shares were also dragged down by comments from hedge funds – which stood to make a profit from falling share prices – that more bad news was coming. In particular, Sydney-based VGI Partners warned future revenue had been overstated. This story Administrator ready to work first appeared on Nanjing Night Net.

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