To say the Slater & Gordon Limited (ASX: SGH) share price has been volatile over the past few years would be an understatement.
Once Australia's biggest and fastest growing law firm by total worth (and almost every other measure), the value of all Slater & Gordon shares has shrunk to a measly $102 million. Shares currently trade for just 29 cents.
Is Slater & Gordon dirt cheap?
Since making the disastrous Quindell acquisition in the United Kingdom in 2015, writing down hundreds of millions of dollars and being the subject of scrutiny by the Australian Securities and Investment Commission into its accounting practices, the law firm might now be on the brink. Indeed, speculation is swirling that the company may be forced to either recapitalise or restructure just to stay afloat.
Value investment or value trap?
Every dyed-in-the-wool value investor loves to sink their teeth into the financial statements of companies with 'a little hair on them'. Generally, these are the types of companies that make ordinary investors uncomfortable and hence discount the share price.
However, sometimes, those companies have too much hair on them and are most likely a value trap, as opposed to a value investment. I think that Slater & Gordon is more likely a value trap.
Foolish Takeaway
To my mind, a recapitalisation or restructure of Slater & Gordon is the upside, which isn't great for shareholders. But the downside is the company's lenders close in and pull the rug from under it. Together, these two outcomes do not make Slater & Gordon shares a compelling investment, in my opinion.
This is one to watch from the sidelines.
