Slater & Gordon Limited share price up 13% on class action settlement news

The Slater & Gordon Limited (ASX: SGH) share price has responded well to news that the embattled law firm has agreed to a settlement with disgruntled shareholders through a mediation process facilitated by the Federal Court.

In early afternoon trade its shares are up over 13.5% to 8.4 cents.

What was the settlement?

According to today’s release, Slater & Gordon has agreed to a $36.5 million settlement with thousands of shareholders led by investor Matt Hall in relation to the significant loss of the company’s value following the disastrous $1.3 billion acquisition of the Quindell insurance business.

Lawyers from rival law firm Maurice Blackburn helped broker the deal.

Though it is worth pointing out that while the settlement terms have been agreed in principle and are subject to conditions, the parties to the settlement are still legally bound to negotiate the formal documentation giving effect to those terms.

Should you invest as well?

Whilst it is no doubt a relief to get this class action out of the way, this may not be the end of it.

The company has advised that it has also received notification of another potential class action proceeding by former and existing shareholders.

But even if that doesn’t materialise I would not be in a rush to invest in the company. Whilst it may end up making a miraculous recovery from its fall from grace, I would caution against risking your hard-earned money in the company’s shares given its past history.

Instead, I would focus on other professional service business like IPH Ltd (ASX: IPH) or Xenith IP Group Ltd (ASX: XIP).

Alternatively, these high-flying growth shares could be even better investment options in my opinion.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of IPH Ltd. 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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