Buy the dip! (ROF is not authorised to give financial advice and the value of your investment may go down as well as up, in fact it's quite likely.)
Knights' share price plunged by more than 60% this week following an alarming trading update, weeks after the firm's Chief Financial Officer and General Counsel offloaded a substantial number of their shares.
The firm told the market in January that it anticipated "good trading in the second half" and was "confident in delivering a full year performance in line with market expectations".
However, on Tuesday the listed company delivered a trading update which warned that activity rates were "lower than management's expectations" and that "a continuation of the impact of Omicron" and "recent macro conditions" had "slowed growth to a greater extent than anticipated".
The firm blamed sickly employees for its stuttering performance, stating that "the persistent effects of Omicron across the country have meant, in particular, greater illness rates amongst our people, resulting in the business not benefitting from a faster return to office working and the consequent advantages of our team-based culture".
Knight said it had also seen a "softening in business confidence" but insisted, "The Group has not seen any significant losses of clients or fee earners".
The bad news sent its share price tumbling from 365p to 145p as investors digested the grim forecast and dumped their stock.
Don't worry, it's not a cliff, it's one side of a canyon.
Knights CEO David Beech became a multi-multi-multi-millionaire after the firm floated, and he still owns almost 20% of the issued share capital. His remaining stake was worth about £63 million, until Tuesday.
"Beech lost £30m in 7 minutes", gloated one of several Knights sources, adding, "Apart from Nick Leeson, not many will have lost that much that quickly". ROF asked Beech what the experience was like, but he declined to respond.
However, a couple of Knights' top brass had the good fortune to sell their shares in advance of the critical trading update. Chief Financial Officer Kate Lewis sold over 70% of her shares six weeks before the announcement.
With fortuitous timing, Lewis offloaded 180,000 of her 243,516 shares on 8 February at 375p, netting £675,000. According to the market notification which directors are obliged to make, the sale was "principally in order to fund the resulting tax and national insurance liability" arising from a share option she exercised. Three days later she sold another tranche for £40,000.
Knights' General Counsel and Company Secretary, Lisa Bridgwood, was even luckier. She disposed of 11,144 shares on 11 March, netting her £40,000 just 11 days before they halved in value. Neither of the officers were obliged to hold onto their shares in the period running up to the announcement, and there is no suggestion of wrongdoing.
The firm said, "As a listed business, Knights is required to announce without delay any material change in its financial performance compared to expectations, which it did on Tuesday, 22nd March, as soon as it became aware".
The biggest losers may be Knights' newest joiners. Langleys Solicitors is due to be swallowed up by the acquisition-hungry firm today. The initial purchase price was set £5.25m in cash and 704,515 shares in Knights, valued at the time at £2.75m. On Thursday they were worth £1m.
The firm told RollOnFriday that "recent increased absenteeism" had slowed its return to the office, which "is key to Knights’ culture". That must explain why Knights staff rated themselves the least satisfied in the UK with their firm's culture in the RollOnFriday Best Law Firms to Work At 2022, resulting in Golden Turd status.
In the survey staff complained about the firm's focus on shareholder expectations, and their concerns won't be assuaged by the chatter which followed the latest trading update. One investor who spent £30,000 'buying the dip' commented, "I would sort the feckers out in a week, everybody get your arses in the office and start doing some proper work and client interfacing as opposed to doing housework and long walks. There will be some s-hit flying about at the pointy end of the company that’s for sure. Fingers out and start fecking performing".