One could also well argue that the market did factor for this and priced SGH accordingly, as the share price ranged below $2.00 throughout 2012.
In 2013, it ended the year at about $4.54 but did not jump across the $2.50 barrier until after May 2013.
In 2014, the price got to $6.00. It then took off in 2015, and just as quickly as it did this, and significant capital was raised, the price fell dramatically. From that record high of $8.07 on 7 April, the stock has fallen to its current $2.75. That's a fall of 66% from its all time high. That's not just institutions talking. That's also retail investors talking, super funds talking, self funded retirees talking, vendors talking and staff talking.
I doubt that the fall would have been anywhere near as dramatic but for the capital raising at near the highest levels in the market. Institutions and retail investors who bought into the capital raising have since bled serious $ (if still holding). Not so, the emerging day traders, short termers and others who are not in the stock for the long term, but are merely trading it on technical movements, momentum and /or the sentiment of others.
Falling share prices therefore are one thing. But when your market cap also falls and, even on an enlarged capital base, is lower now than what it was 12 months ago, then that is a problem, because it suggests that much more than merely market sentiment, macro behaviour, or specific stock confidence has changed.
So, figure this: PSD was acquired for $1.225B through a combination of equity ($890M) and debt ($335M).
The equity was priced at $6.37. So using this as the corresponding figure for the enlarged capital base, this should have given SGH an updated $2.24B market cap. Add to this the PSD specific debt load, and the adjusted balance came to $2.58B.
Yesterday, the market cap closed at $961M. Add to this the PSD specific debt load of $335M, suggests an enhanced value of $1.3B.
So, as of yesterday, the market was saying that $1.225B was paid for PSD which is now valued (by the same metrics) by the market (+ PSD specific debt) at $1.3B - a reduction in PSD linked enterprise value of $1.28B.
So >100% of the corresponding value of the PSD acquisition has been written off by the market as against SGH's enlarged share capital. All in <5 months. So, right here, right now, the market is well and truly questioning some of the decisions that have been taken, and some of the actions that have been taken.
As for performance, that will certainly need to do the talking. For starts, they have $616M of Current receivables to get collected in. They have $553M in current WIP that needs to be invoiced out and collected in. That's a significant amount to get through.
As I said some 6+ weeks ago, they need new blood in the Boardroom. On the Conference Call, Grech confirmed this by saying that Egon Zehnder had been engaged to recruit 2 new non-executive directors to the Board. Now, when this process is concluded, it will (and should) in all likelihood be considered as good.
Likewise, the likely investor day which arguably might occur by /during October.
Likewise, conclusion of the ASIC investigation although we've been hearing since mid July that it was (at a max) only weeks away. ASIC will take however long that they need to do things, just as other regulatory agencies will do the same thing (if or when its on their watch).
Investor relations may also be ramped up.
But then, they'll have to contend with the soft numbers coming out of QLD (especially in PI and in conveyancing), and the skewed weighting impact of PSD towards H2.
And then there is the inevitable and ongoing management of people, staff, differing cultures, firm and practice philosophies, competing egos, etc. Slaters must therefore be considered near unique in this regard - the ultimate harmonious, fully blended family.
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