The UK fund manager's share price - at 350p in late January when its big expansion into the US was announced - had dropped as far as 265p.
Govett is being challenged with a $20m lawsuit in the Californian courts by an independent fund it managed, Govett American Endeavour Fund.
GAEF, listed in London, alleges that the Govett-owned managers of its fund were secretly taking fees from companies it invested in. It also alleges managers misrepresented the profits of some of the portfolio companies.
In the suit, which names Arthur Trueger, Govett's executive chairman, GAEF accuses its former managers of negligence and breach of contract.
Govett, which has denied all the charges, has instructed its lawyers to counter-sue for very significant damages.
Govett had been planning to pay for the merger with the much larger Duff and Phelps by issuing preference shares. The collapse in Govett's share price threw the mathematics of the merger into disarray.
"Despite the termination of the merger agreement, the two companies are continuing to discuss possible ways to combine their businesses," a joint statement said yesterday. The companies have accepted that the bitter row with GAEF may not be resolved for a long time.
The merger would have propelled Govett into the top 10 of UK fund managers, with a total of $50bn in funds under discretionary management, compared with $9bn at the moment. Duff and Phelps is a Chicago-based manager largely focused on domestic fixed-income business.
Govett is highly regarded for its international equity expertise. The merger would have given it access to most US brokerage houses, as well as giving it the credibility to take on big mandates from US institutions.