These are my personal thoughts on how the next few weeks will...

These are my personal thoughts on how the next few weeks will unfold.

1. Agree with posts that the pressure on ASIC must be white hot now. Remember though, they are only looking at the 2014 accounts (according to the press release) - not the last 10 years. Who knows why the CFO resigned? IMHO, if I had a CFO who signed-off on preliminary financial accounts and then made me / the CEO look a tad foolish because those same accounts had to be amended / tweaked in the final announcement, I'd probably resign too and take my audit company with me. That said, I'm sure the CFO is a very decent man. Not a good way to go though. The SGH debacle is also a national political issue now. Seriously, we'd be mad not to think the way these guys are connected there wouldn't be calls to government depts. (both here and abroad) in light of how this plays to ordinary mums and dads & their super funds - the very clients SGH relies on. And it should.
2. I'm hoping for an announcement from management to clean this mess up - that is, not, yeah, it's all roses, the worlds does not begin and end with 2016 cashflows, UK has clearly changed; rather, they should tell us, our banks are happy, we're comfortable with debt, we have revenue into 2017 in hand, our senior management are committed to staying and turning this around ...etc. I'd be happy with as many pages of commentary as the want to give us; BUT as previously posted, I don't expect one next week i.e. unless pressured by other internal SGH executives who have decided it is time to change the long held, 'less said is more' view. New internal stakeholders would now be at play because the CEO's reputation has been knocked about - not because he is or isn't brilliant - but because of the share price mess we're in; the CEO did not pick the $30 million first half cash hole early and no one picked the change to UK policy on time. The first big wave on non-shorts bailed out on the day of the AGM because of the magic words 'cash deficit' and 'bank covenants'.
3. I think the ASIC issue and the accrual accounting issue and the shorting issue is kind of history in a way though; all eyes are on the UK and what this means to the book value of the business. Again, a guess but i'd expect the serious shorts to be out or leaving next week if the prices stays this low. I can't recall where i read it but pretty sure the company that stated it was short (publicly) had a target of $1. That was when the price was upwards of $5 - unthinkable at the time. I also don't believe this price will suddenly bounce when the shorts go; it'll rise slowly - and then they will return once the price hits a certain mark again - SGH will remain vulnerable until the UK is sorted out.
4. Won't even guess a price up or down in the next few weeks i.e. unless management talk - I'm obviously hoping up.
5. I'm also hoping that because of the way WIP is recorded and the way cases are booked, we'll have a year's+ worth of WIP cases to be resolved by early 2017 - so we'll have 12 months of future cashflows on the books to be converted from WIP to cash; that combined with promised cashflow targets in 2016 means that debt can be knocked down a bit in 16 & 17. Why wouldn't they be able to generate the same cashflow in 2017 as they are expecting in 2016 i.e. despite the policy change - there is a good cash lag; that said, agree debt is suddenly high and agree the natural hedge will be knocked about a bit. If only it had been fully equity funded - we'd all be in clover!
6. For me, the potential goodwill asset write-down is the biggest issue - because they have said the carrying value is based on goodwill and WIP ...etc. therefore, it has to be affected unless they can use that infrastructure they have collected and go like the clappers and generate cash - then all will be fine; IMHO, they won't be required to write-down the asset until the actual legislation kicks in and changes are actioned - until then it is still speculation and rumours of what might or might not happen. So totally guessing - but you'd reckon any write-down would happen in 2017 / 2018 but will clearly be factored in earlier (in terms of the share price). All this said, I am a believer in their ability to manage change - and do it to grow the business.
7. In summary, IMHO, reckon the next two weeks will be totally messy - up and down - but I maintain my medium term and long term view that from today's prices people will get rich again.

A big P/S (that title of this thread): one thing that really annoys me about all this carnage - and I think it has been missed by most of the media outlets - is WHO actually lent their shares to the shorts to short. That is the big question for me, especially because of SGH's massive retail shareholding base; if it turns out that reputable Australian super funds looking after our money and the money of ordinary mums and dads were the ones who leant the stock out (and indeed have not called it back yet) - they absolutely have blood on their hands. All this carnage for a few percentage points payable to them by the shorts. What a shocker and very un-Australian. They need to seriously explain themselves IMO in terms of their charter to ordinary mum and dad investors. I'm hoping one of the media outlets will get bored with the usual 'SGH's shares dive' and dig up some info on who lent the big money out.