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Is it worth investing in listed law firms?

Legal profession’s stock market performance was poor last year but 2021 could bring a recovery

Since the Legal Services Act allowed law firms to go public, listed law firms have hardly set the world alight.

Last year was a particularly bad one for the handful of firms to abandon the partnership model to go down the initial public offering (IPO) route. To date only one, Knights, has recovered from the March plunge that saw billions of value lost from stock markets across the globe. Most are languishing substantially below their 2019 pre-pandemic highs.

This marks out the legal sector from other industries, in particular growth areas like tech, which have bounced back strongly. In some ways this is strange, because, unlike hard-hit sectors like travel and hospitality, where company valuations have also plummeted and remain low, the commercial branch of the legal profession has held up remarkably well in spite of a year of lockdowns and social distancing. Yet law firm shares continue in the doldrums.

Perhaps it’s the law firm model that is putting off investors. The received wisdom is that partnership is a major carrot for lawyers, giving those who make it to the top control and wealth. As such, so the logic goes, law firms that are run as public companies, where control and usually also wealth is diluted, will over time fail to attract the best talent. The result is that many still view listed law firms as essentially vehicles for enrichment of the partners who take their firms public, rather than interesting long term propositions.

But a listed law firm that made it really big could shatter that narrative. A major success, which brought associated financial rewards for the lawyers who are part of it, would surely lead other firms to follow. And then who knows?

The 2021 Legal Cheek Firms Most List

Curious to see how this branch of the legal profession will fare, I’ve created a fund of six law firms listed on the London stock market, and apportioned £100 in each. I’ll be updating readers throughout 2021 on how each firm gets on and how the fund does overall.

The firms are: DWF Group PLC, Knights Group Holdings PLC, The Ince Group, Keystone Law Group PLC, Gateley Holdings PLC and Rosenblatt Group Holdings PLC.

As of this morning, after a not great morning in the market, and taking into account for commission for purchasing the shares, the fund is worth £532.90, already falling in value by 11% (£67.10) from the initial £600 outlay. Not a great start but, as anyone thinking of investing must remember, shares can up as well as down. A breakdown of the individual firms’ value is below.

DWF Group PLC: £91.02 fund value (83.50p per share)
Knights Group Holdings PLC: £84.64 fund value (368p per share)
The Ince Group: £88.05 fund value (46p per share)
Keystone Law Group PLC: £86.70 fund value (510p per share)
Gateley Holdings PLC: £90.72 fund value (144p per share)
Rosenblatt Group Holdings PLC: £91.77 fund value (57.00p per share)
Total fund value: £532.90

I’ll be back next month with an update on how the legal fund is getting on.

This series is in no way intended to amount to financial and/or investment advice.




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About Alex Aldridge

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