Like a French tank the Slater & Gordon Limited (ASX: SGH) share price appears to only have one gear, reverse, and that's unlikely to change after the company today updated the market on its cash flows and debt load for the six-month period ending December 31 2016. Anyone hanging onto Slater & Gordon shares may want to look away from its share price chart now.
Source: Google Finance: Slater & Gordon share price performance March 2015, -98%.
The stock has lost 98% of its value since March 2015 when it traded well above $7.50 per share after it announced the $1.3 billion acquisition of a UK-based business named Quindell that already had professional investors in the U.K. and U.S. loudly raising questions over its solvency, probity, and accounting methodologies.
Today Slater & Gordon announced another a net loss of $425 million and as a consequence of the debt load it took on to finance its failed U.K. acquisition Slater & Gordon's CEO today conceded: "It is clear that based on current performance expectations the continued support of the company's lenders is fundamental, as current levels of bank debt exceed total enterprise value".
In effect shareholder equity in the business has been wiped out in a textbook lesson for investors as to how too much debt can quickly bring down any company.
Needless to say it looks like anyone holding Slater & Gordon shares should get out while they still can, given its lenders are the primarily secured creditors.
