Why Slater & Gordon Limited shares sunk 15% today

Slater & Gordon Limited (ASX: SGH) is again in the limelight, with its shares falling 15% within minutes of the ASX’s open this morning.

Source: Google Finance

Source: Google Finance

In an announcement to the ASX, the embattled law firm said it continues to work with auditors and advisers to finalise its half-year results, including statutory gross operating cashflow. It said it expected to report its results on February 29, 2015.

What’s the big deal?

Slater & Gordon (and to a lesser extent its smaller rival, Shine Corporate Ltd (ASX: SHJ)) has come under significant pressure to justify the process it uses to report particular items in its financial results.

Indeed, following the dramatic falls in Slater & Gordon’s share price (pictured above) awave of negative sentiment washed over Shine Corporate’s financial statements. Shine’s shares are suspended and expected to remain that way until at least Friday 29 January 2015 or until it has reviewed its financial results.

Despite originally shrugging off media and analyst scrutiny, Slater & Gordon moved to appoint a new Chief Financial Officer in Bryce Houghton and it is conducting a review of its books.

On 17 December 2015, the Company also announced its intention to review its approach to financial forecasting to be led by new Group CFO Bryce Houghton and supported by advisors appointed by the Board,” Slater & Gordon said today.

“The Company advises that this process is proceeding as planned,” Slater & Gordon added. “In the course of this process the Company is considering its expectations for operating performance and cashflows for the balance of this financial year.”

Foolish takeaway

The uncertainty swirling over Slater & Gordon and Shine Corporate is unlikely to abate anytime soon. Indeed, both companies will now be held more accountable for the viability of their financial reporting practices. I’d only be speculating in forecasting an outcome, but from recent share price movements, it would appear investors are bracing for the worst.

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Motley Fool writer/analyst Owen Raszkiewicz owns shares of Slater & Gordon. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn or you can follow him on Twitter @ASXinvest.

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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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