Why the Slater & Gordon Limited share price more than doubled today

Credit: Pixabay

The Slater & Gordon Limited (ASX: SGH) share price has overcome a massive hurdle today.

As at 12:30pm (Sydney time), the share price had risen a whopping 89.8% to trade at 56 cents, although it did rise as much as 130.5% to a high of 68 cents earlier in the session. That was the highest price the shares have traded at since late in February.

Source: Yahoo! Finance

Source: Yahoo! Finance

Indeed, the shares have been on a rollercoaster ride since that time, exacerbated by the prospect of the heavily-indebted group not being able to negotiate a new deal with its banking syndicate, which includes both National Australia Bank Ltd. (ASX: NAB) and Westpac Banking Corp (ASX: WBC).

Rather than the possibility of having its debt called due by March 2017 in the event that an agreement had not been reached, Slater & Gordon now has until at least May 2018, mitigating the risks facing shareholders.

You can read more about the agreement, here.

Although investors will no doubt be shattered about missing out on today’s incredible rebound, the fact remains that Slater & Gordon remains a very risky investment prospect. The company will need to prove its ability to reduce costs and improve cash flows from operations over the coming periods, which is by no means a guarantee at this point.

Still, investors should be pleased that the company is out of the direct firing line, for now.

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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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