As the Legal Cheek fund surges by 15%, our listed law firm columnist wonders if a Reddit-driven windfall could be around the corner
If the UK’s 100,000+ law students clubbed together to buy shares in listed law firms could they push their value through the roof, enabling them to dramatically expand their training contract numbers and create hundreds of new opportunities for future lawyers?
Even amid the current excitement surrounding Gamestop, a struggling US video game retailer whose shares have surged by over 8,000% (before plunging by 67%) amid coordinated buying by millennial day traders on the WallStreet Bets Reddit page, the above scenario seems pretty far-fetched.
But who’s to say that the Gamestop principle — which sees amateur traders invest en masse in unfashionable companies that hedge funds have bet will fall in value, driving up the share price dramatically — couldn’t apply to listed law firms?
Looking at the Legal Cheek listed law firm fund, the firm most likely to come to the attention of the Gamestop crew is DWF, whose value is down considerably since the onset of the Covid-19 pandemic last spring and has a short position taken against it by London asset management fund Merian Global Investors.
Another firm that could 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 hinder recovery in a downturn. And the fact that the Ince Group share price has fared so badly over the last few years (it’s down 74% since 2018) means that there is plenty of upside (although room to fall further too). So anyone looking for ‘DeepFuckingValue’, as the Reddit investor who led the Gamestop buying terms himself, may find themselves tempted to have a flutter.
Of course, amateur investors motivated by disrupting the status quo and giving boomers a bloody nose may think twice about piling into corporate law firms and enriching their owners. There was a reminder last week of the wealth that can go to the select few who take law firms public when it was revealed that Knights boss David Beech is set to pocket £61 million from cashing in almost half his shares.
And so to the Legal Cheek listed law firm fund, which has surged in value by 15% this month. The big movers are Rosenblatt Group Holdings (up from 57p per share to 77p) and Gateley (up from 144p to 176.50p). Both firms expect their latest revenue figures to exceed expectations.
Keystone is also up substantially from 510p to 575p per share after releasing a strong trading update last week, while Ince has gone from 46p to 50.50p and Knights 368p to 402p. At the time of writing DWF is the only faller, dropping from 83.50p to 81p. The value of the overall fund rose from £532.90 a month ago to £615.15 today, meaning I’ve not only already recouped my original investment and trading platform charges but reaped a profit of £15.15. Heady days in the markets.
The Legal Cheek listed law firm fund
DWF Group PLC: £88.29 fund value (81p per share).
Knights Group Holdings PLC: £92.46 fund value (402p per share)
The Ince Group: £96.65 fund value (50.50p per share)
Keystone Law Group PLC: £97.75 fund value (575p per share)
Gateley Holdings PLC: £111.20 fund value (176.50p per share)
Rosenblatt Group Holdings PLC: £128.80 fund value (80p per share)
Total fund value: £615.15
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. And remember, shares can go up as well down and professional advice should always be sought before investing.