As the legal cheek funds rise 15%, our listed law firm columnist wonders if a Reddit-generated bargain might be around the corner
If the UK’s more than 100,000 law students band together to buy shares in publicly traded law firms, could they skyrocket in value, allowing them to dramatically increase their number of training deals? and create hundreds of new opportunities for future lawyers?
Even amid the current excitement around Gamestop, a struggling US video game retailer whose shares jumped more than 8,000% (before plunging 67%) amid coordinated buying by day traders in the Generation Y on the WallStreet Paris Page Redditthe scenario above seems pretty far-fetched.
But who’s to say that the Gamestop principle – which sees amateur traders investing en masse in old-fashioned companies that hedge funds have bet will lose value, driving the stock price up dramatically – couldn’t apply to publicly traded law firms?
Looking at the legal cheek listed law firm fund, the firm most likely to catch the attention of the Gamestop team is DWFwhose value has fallen significantly since the start of the Covid-19 pandemic last spring and has a short position taken against it by London-based asset management fund Merian Global Investors.
Another company that might fall into this category is Ince Group. While there are no disclosed shorts against Ince, like DWF, it carries significant levels of debt, which, while not necessarily bad in itself, could hamper recovery in a downturn. And the fact that Ince Group’s share price has held up so poorly over the past few years (it’s down 74% since 2018) means there’s plenty of upside potential (although there is still room to drop further). So anyone looking ‘DeepPutainValue’as a Reddit investor who ran Gamestop’s purchase terms himself, might be tempted to have a flutter.
Of course, amateur investors motivated by status quo disruption and baby boomer nosebleeds may think twice before cramming into corporate law firms and enriching their owners. There was a reminder last week of the wealth that can go to the privileged few who take law firms public when it was revealed Knights boss David Beech was set to quit. pockets £61m to collect almost half of its shares.
And so at the legal cheek listed law firm funds, whose value jumped 15% this month. The big drivers are Rosenblatt Group Holdings (from 57p per share to 77p) and Gateley (going from 144p to 176.50p). Both companies expect their latest revenue figures to exceed expectations.
Keystone is also up substantially from 510p to 575p per share after issuing a strong trading update last week, while Ince rose from 46p to 50.50p and Knights from 368p to 402p. At the time of writing, DWF is the only faller, dropping from 83.50p to 81p. The value of the global fund has gone from £532.90 a month ago to £615.15 today, which means that I have not only already recouped my original investment and trading platform fees , but I made a profit of £15.15. Exhilarating days in the markets.
The listed law firm fund Legal Cheek
DWF group automaton: Fund value of £88.29 (81p per share).
Knights Group Holdings PLC: Fund value of £92.46 (402p per share)
The Ince group: Fund value of £96.65 (50.50 pence per share)
Keystone Law Group PLC: Fund value of £97.75 (575p per share)
Gateley Holdings PLC: Fund value of £111.20 (176.50 pence per share)
Rosenblatt Group Holdings PLC: Fund value of £128.80 (80 pence per share)
Total fund value: £615.15
I will be back next month with an update on the status of the legal fund.
This series is in no way intended to constitute financial and/or investment advice. And remember, stocks can go up as well as down and professional advice should always be sought before investing..