Publicly-traded law firms have existed in some overseas jurisdictions for a number of years now. But they have yet to be allowed in the United States.
In light of turbulence experienced by two such firms over the past year, I doubt we will see them any time soon. A recent article by Jonathan Shapiro in the The Australian Financial Review details the recent troubles of Slater & Gordon and Shine Corporate, who have seen their shares plummet.
Shapiro asks the question: “Should law firms, which have avoided the sharemarket for centuries, ever become public companies?” He aptly notes the two central issues that must be addressed:
The first is whether a law firm can manage its duties to the court and clients as well as serve its fiduciary duty to investors. The second is whether the way in which the stock market assigns value leads management to grossly misallocate capital and destroy value.
Shapiro discusses in detail how the wrong incentives could drive decision-making at publicly-listed firms and ultimately lead to shareholders losing their investment. He concludes
Slaters and Shine may yet restore faith in the concept of a listed law firm, but they’ll need to convince a whole new generation of investors that their capital is creating rather than destroying value in the legal process.
I’d invest my money elsewhere.