Slater & Gordon Ltd. fell the most on record after the U.K. regulator said it was probing a British company that sold a unit to the Australian law firm earlier this year.
Shares in the Melbourne-based company slumped as much as 23 percent on Thursday and were 19 percent lower at A$4.985 as of 1:17 p.m. in Sydney. The world’s first publicly-listed law firm has slid 29 percent since it resumed trading April 2 after buying Quindell Plc’s professional services division for 637 million pounds ($1 billion).
The U.K. Financial Conduct Authority announced Wednesday it was investigating Quindell, saying some of the technology company’s accounting policies were “at the aggressive end of acceptable practice.” Slater & Gordon said in a statement Thursday it was confident it had no liability in relation to the investigation.
The law firm’s stock price has been under pressure since the deal amid concern it paid “more than double estimated valuation” for the Quindell division, said Michael McCarthy, chief market strategist at CMC Markets. “People who were short selling Quindell have transferred their attention to Slater & Gordon, so it’s a double whammy.”
Short interest as a percentage of Slater & Gordon’s outstanding shares climbed to 10.2 percent on June 10, the highest since March 2014, according to data compiled by Markit Ltd. It fell to 4.3 percent on Tuesday, the most recent data showed.
Quindell came under scrutiny last year after New York short seller Gotham City Research LLC published a report in April 2014 making serious accusations over its finances. The report triggered a 39 percent one-day drop in the software provider’s shares. Quindell won a U.K. libel judgment against Gotham in September.
Quindell said Wednesday changes to its accounting policies will affect previous recognition of revenues and profits in the division.
Slater & Gordon said in a separate statement that its assessment of the division wasn’t based on Quindell’s financial statements.
“We have always been of the view that the accounting policies of Quindell Plc were aggressive,” Slater & Gordon said. “Quindell’s historic accounting policies were irrelevant to our valuation.”