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Slater & Gordon Limited shares slump on removal from ASX 100 group

Credit: Patrick McKnight

A horrendous run for Slater & Gordon Limited’s (ASX: SGH) shares over the last several months has seen the legal eagle removed from the S&P/ASX 100 (Index: ^AXTO) (ASX: XTO) as part of the S&P Dow Jones Indices quarterly rebalance.

The legal firm has been replaced by Sirtex Medical Limited (ASX: SRX) as one of Australia’s top 100 public companies.

Indeed, Slater & Gordon’s share price has taken a huge hit over the last eight months or so. Until a fortnight ago, they were trading at around $3 per share, down from a high of $8.07, as a result of two major investigations into its accounting practices and the highly controversial acquisition of Quindell Plc’s Professional Services Division in the United Kingdom.

Last week however, the shares plunged to a low of just 59.5 cents after the group announced proposed changes to personal injury laws in the UK. Although the group has since reiterated its profit guidance for the current financial year, it remains unclear how the changes could impact their earnings in financial year 2017 and beyond.

The shares have since rebounded to close at $1.185 on Thursday.

Source: ASX website

Source: ASX website

Despite their low price, Slater & Gordon shares remain a risky investment prospect. As highlighted above, the circumstances surrounding Slater & Gordon remain unclear, as do the outcomes of the two investigations, which could potentially see the share price slip even lower than its current level.

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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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