Why the Slater & Gordon Limited share price was slammed

The Slater & Gordon Limited (ASX:SGH) share price has fallen 88% since May

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Slater & Gordon Limited's (ASX: SGH) share price came under renewed pressure on Tuesday, ending the day at just 97 cents which represented a 12.6% decline from the previous closing price.

So What: Considering the absence of any fresh news to explain yesterday's fall, it seems likely that investors may have been taking some of their cash off the table following a rebound in the group's share price recently.

Indeed, Slater & Gordon's share price fell to a low of just 59.5 cents just under a fortnight ago, down from $3 last month and $8 in May. The shares more than doubled in price in what was a three-day rebound, hitting a high of $1.445, but have since retreated again as investors once again become doubtful about the company's future prospects.

The latest concern for Slater & Gordon is proposed changes to personal injury laws in the United Kingdom. Although Slater & Gordon has reiterated its earnings forecasts for financial year 2016 (FY16) twice, investors are still pessimistic about what the changes could mean for the group in FY17 and beyond.

Slater & Gordon controversially acquired the UK-based Quindell Plc's Professional Services Division earlier this year for more than $1 billion and it is believed that the business could be severely impacted should those proposed changes be implemented.

Now What: Shares of Slater & Gordon have fallen an agonising 88% since peaking in May this year and currently boast a market value of just $342 million. While that might seem like a bargain to some investors, Slater & Gordon is still a very risky investment prospect and the share price could fall even lower than it is today.

Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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