From the Australian today. Good for the directors? Oh yes. Looks like Slaters and staff have kept over 70% of the shares on offer. And they are still in debt. Very curious indeed.
Let's see if the talent floats too
YOU can tell the top of the market has arrived when the investing public willingly give their money to lawyers.
After Slater & Gordon's first, sensational day as a listed company, it might look as if this is the way of the future for the legal profession.
But it's not. Law firms that are interested in attracting and keeping the nation's best legal talent will be unlikely to float.
They might incorporate in order to more efficiently distribute profits to family members or retain earnings. But that is a long way short of raising money from the public in a float.
A public listing is great news for the generation of principals that sells its equity. They become instant millionaires while retaining control of the firm.
But for subsequent generations, it's poison. And here's why: five years from now, the last of the share sale restrictions on the Slater's principals will expire. They will then be free to cash in their remaining shares, take their millions and walk away.
The firm will then be run by a generation of lawyers who will be forced to reduce their incomes in order to share the firm's profits with the investing public.
For the generation of lawyers who sold the firm, that problem is merely theoretical. They will still hold plenty of shares and therefore a healthy dividend stream.
But when they go, Slaters looks set to be mugged by economic reality. How long does anyone expect that the next generation of lawyers will put up with reduced incomes in order to keep shareholders happy? A nanosecond, perhaps?
If the next generation at Slaters is as good as the current one, they could be partners at a traditional law firm where partners get to keep all the firm's profits without the complications of looking after shareholders.
So five years from now, the big winner from the Slaters float might be that firm's arch-rival, Maurice Blackburn Cashman, which has rejected the option of listing.
In order to prevent a flight of talent to MBC, Slaters will need to ensure that its profits five years from now are massively ahead of MBC's.
Investors who piled into Slaters have a great deal riding on the success of its growth strategy - a primary reason for the float. But a close reading of the prospectus shows that the war chest is empty. After the float, Slaters still has short-term borrowings of $7.1 million, according to the pro-forma balance sheet. It plans to grow by blowing out that debt by about $15.4 million. Slaters might succeed. But then again they might not. Either way, the lawyers who sold the firm yesterday will still be in clover.