One of the biggest movers on the market on Tuesday was the Slater & Gordon Limited (ASX: SGH) share price.
The embattled law firm's shares finished the day over 39% higher at 5.3 cents after it advised the market that senior lenders unanimously approved the proposed senior lender creditors' scheme of arrangement.
However, this gain appears to have taken Slater & Gordon by surprise, which has led the company to issue another release to reiterate the effect of the recapitalisation proposal.
According to the release, the company wishes to remind shareholders that due to the number of shares being issued as part of its recapitalisation, it is proposing a 100-for-1 share consolidation prior to implementation.
This will reduce the company's current share capital from 347.2 million shares to 3.5 million shares on issue. Furthermore, as part of the recapitalisation, Slater & Gordon will issue shares to senior lenders to an extent that existing shareholders' interests will be diluted to just 5% of the company's total share capital post-recapitalisation and post-share consolidation.
Management provided an example to assist shareholders.
"For example, the 13.7 million shares that traded on 28 November 2017 currently represent 3.9% of shares on issue. Assuming the recapitalisation and share consolidation resolutions are passed at the AGM, these shares will become ~137,000 shares and represent a ~0.2% interest in the post-recapitalisation Company."
Judging by today's release, Slater & Gordon may have been concerned that the market had misunderstood its previous releases.
After all, who would want to buy shares of a company ahead of a recapitalisation that will be extremely dilutive. It does, therefore, come as little surprise to learn that its shares are down 17% to 4.3 cents during morning trade.
I would suggest investors continue to avoid Slater & Gordon and industry peer Shine Corporate Ltd (ASX: SHJ).
