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54.5¢ slater & gordon limited

Capital Raising, page-98

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aimone

50,328 Posts.

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28/12/16

21:12

Post #: 21583484
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Originally posted by Gekkowolf ↑

Interesting discussion about risk. Normally, equity is more risky and debt holders are in a relatively better position. IMO however, this may not be the case with a service company. What tangible assets do service companies have? Not much. So, IMO the risk differential between an equity holder like a shareholder and a debt holder is not that great.

Ask yourself one simple question what assets can be liquidated in a fire sale of a service company? Not much! The main assets are people and they can walk and probably set shop elsewhere. And just before someone smart says what about the WIP? I would say what about it? It still takes people to see the files through at there completion to convert the WIP to cold hard cash. So, it goes back to the main assets being people.

So, IMO the risk deferential between an equity holder and debt holder is not that great. It's just that first tier banks are not that flexible in holding an stock rather than debt. But second tier holders are more flexible so they can purchase the debt at a discount and convert into equity at probably the same rate and not be worse off. Just my amateur thinking! DYOR!

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yeah

just watch the good wife?

as evidenced in a 97% drop in the share price

Last edited by aimone: 28/12/16

SGH Price at posting: 23.5¢ Sentiment: Sell Disclosure: Not Held
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0 Great analysis

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