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Pre-Paid Legal Services Are a Good Bet, but What About Investing in Biglaw?

I was surprised to learn that Prepaid Legal Services comes recommended as a strong investment opportunity at two different stock market advice sites, Motley Fool and Seeking Alpha. I'd always believed that pre-paid services were so limited in scope, basically covering simple routine matters like will drafting or uncontested divorce, that they didn't interest many consumers. Plus, a few months ago, I posted on impending FTC regulations that would significantly restrict some of the multilevel marketing schemes employed by Pre-Paid Legal, thereby reducing sales. Finally, I'd often wondered how Pre-Paid Legal is able to attract enough attorneys to handle cases, given the substantial fee discounts that attorneys must offer for work covered by the plan.

But apparently, I was wrong about many of these issues. A recent article in the National Law Journal reports that many solo and small-firm attorneys are drawn to providing service for pre-paid plans because the stable income outweighs the low rates. And analysts view pre-paid plans as a good investment for other reasons as well. At Seeking Alpha, Alex Shadunsky writes that Pre-Paid Legal has only one competitor (Hyatt Legal), and its target market consists of 100 million households, with only 1.5 million presently subscribing:

This is a big opportunity. Litigation in the United States is a constant; I don’t see how this market can shrink if the population of the United States does not shrink and grows at the steady pace it has been growing. If there becomes a Democrat majority in the government, this can also potentially grow PPD’s member base in the short term since Democrats are more apt for litigation.

I wonder whether the same considerations that make Pre-Paid Legal such an attractive investment opportunity would also apply if bloggers like Larry Ribstein have their way, and large law firms can go public

Posted by Carolyn Elefant on May 18, 2007 at 07:14 PM | Permalink | Comments (57)

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