Why the Slater & Gordon Limited share price has surged 14% today

Shares of Slater & Gordon Limited (ASX: SGH) are soaring again today, rising 14% and lifting above the 30 cent mark for the first time in more than a month.

Indeed, Slater & Gordon’s shares are still a long way away from the heights they achieved a little more than 12 months ago when they peaked above $8. Since then, investors have been forced to endure profit warnings, a major impairment of its recent Quindell acquisition in the UK and the threat of multiple class actions – not to mention the potential threat of bankruptcy.

On that final point however, it seems the threat of bankruptcy may have been mitigated, for now, which would explain the recent (and minor) rebound. With an enormous pile of debt littering its balance sheet, the company only has until the end of the month to satisfy its banking syndicate – including National Australia Bank Ltd. (ASX: NAB) and Westpac Banking Corp (ASX: WBC) – that it can remain viable as a business, but recent reports suggested it was close to reaching an agreement.

This would likely involve hefty cost reductions across the business while the pressure would also be on CEO Andrew Grech to find a way to convert its work in progress (WIP) into cash – something that the business has struggled to do in its time as a public company.

However, the fact that Slater & Gordon’s shares are still trading more than 96% below their peak price from roughly 12 months ago reflects the fact the business still faces enormous risks. Indeed, there is even the risk that Slater & Gordon won’t be able to continue as a going concern beyond 31 March 2017, if an agreement is not reached.

Although it seems some investors are inclined to speculate on the company’s future, and bet on a potential turnaround, long-term Foolish investors would be wise to consider other alternatives instead.

For instance, when renowned dividend investing pros like Andrew Page issue buy alerts, it pays to listen. Because investors who followed Andrew's recommendation of Australian Pharmaceuticals in early 2015 could've doubled their money in just over a year, turning $15,000 into over $30,000 by the time he recommended they sell and lock in their profits. Chances are you won't want to miss uncovering the names of Andrew's newest share recommendation and short list of 3 dividend Best Buys Now Shares.
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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. 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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