The Motley Fool

Slater & Gordon share price tanks on capital raising plans

The Slater & Gordon Limited (ASX: SGH) share price is down 19 per cent to $1.22 after the embattled law firm announced a $75.6 million capital raising at $1.15 per share.

Anyone who held onto the stock prior to its debt-for-equity swap and effective takeover by ‘vulture fund’ Anchorage Capital has effectively been all but wiped out anyway given the terms of the restructure involved a painful 1 for 100 share consolidation.

At least the terms of the deal saw a lot of the tort law firm’s post-haircuts bank debt wiped out to mean the 5 per cent of the business still traded on the local stock market has better prospects than the effectively bankrupt pre-Anchorage takeover business. 

The terms of today’s capital raising are also unsurprisingly punishing with shareholders being asked to tip in new funds on a highly dilutory 1 share for 1.0572 basis to mean if you don’t participate the value of your holding will nearly half in an instant. 

If shareholders do choose to nearly double their holding they’ll own a business still with $72 million of net debt on a pro forma net debt to EBITDA ratio of 4.4x. 

In other words Slater & Gordon investors are being shaken down badly again in a ‘heads I win, tails you lose’ type scenario as the alternative could be even worse.

As such I’d suggest this is not a business I’d suggest taking a punt on!

NEW. The Motley Fool AU Releases Five Cheap and Good Stocks to Buy for 2020 and beyond!

Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading over 40% off its high, all while offering a fully franked dividend yield over 3%...

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.


Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

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 Scott Phillips.