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SGH sgh limited

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mike8654

650 Posts.

11

27/03/18

22:48

Post #: 32072644
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Originally posted by Dr.Who ↑

I don't share your view Jim.

My view (with benefit of hindsight) is the company over leveraged in the mistaken belief they could do a better job of running PSD and create synergies. Over leverage led to being a prime target for shorters spinning a story; the pressure brought to bear on the SP led to stresses on debt to equity ratios, which in turn led to insurance companies using the stresses to their advantage playing hard ball settling claims (aided by the UK Govt proposals) and eventually the whole thing unravelled as original lenders could no longer support and management structures completely broke down. All in my view, based on my best guess of explaining what transpired.

I don't buy this fraud line you speak of. Poor management, yes. Did management seriously believe it would bear fruit? I think so but that would be based on over-confidence in turning it around.

The line between misrepresentation and optimism in business is a fine one I believe, never as clear cut as first glance may seem. One may be aware of problems brewing but remain optimistic, particularly in an industry relying on insurance payouts where delaying tactics and putting pressure to bear on claims can create delays - a belief it is only a matter of time before cash roles in , only it doesn't!

When payout delaying tacts prevail and increasingly flat out denial, the only course is litigation, which is costly and doesn't fit neatly into the model. Compound that with capital pressure and I can see how at one moment there is an optimism it will turn the corner - the next a realisation it has dug too deep a hole. Not fraud, not misrepresentation just plain and simple poor management stemming from deciding to over leverage.

Why settle with MB if nothing wrong? First it is not unusual to settle class actions before get too deep into legal quagmire and from memory wasn't it a condition for the new owners recapitalising? Clearing the decks! No settle legacy disputes, and no recapitalisation = no company.

I believe settling the class action was purely a business decision. If indeed there was fraud, the media and authorities would have been all over it a long while ago. No matter what you and others may think of regulators, it is inconceivable ASIC and other authorities would turn a blind eye to a clear picture of fraud that you paint.

This is simply a case of risks inherant in the stock market and running a business in general. The more one reaches out for growth and the more leverage one takes on the more open to failure if cannot keep a tight forward trajectory. No room for error.

I believe it was a reasonable shout. A law firm should be regraded as defensive industry not subject to economic cycles. It had a good track record often described as a market darling - no matter what is said in hindsight the notion of recording progress profits is reasonable and legal - and if it could deliver on reasonable projections it would have gone from strength to strength.

I cannot deny it was poor management in the end. Nobody can excuse such a massive loss of capital; taking on too big a risk and not utilising a level of expertise to pull it off, yes; fraud no.

It is because of situations such as SGH that fortunes are made on the stock market. If every company was a guaranteed winner then SP increases plus dividends would be no more than year-on-year company growth - minus inflation. It is through companies that fail to meet expectations or fail altogether that opportunities to build great wealth are created.

Take it as learning experience, I have. I lost a tidy sum, though less than at the peak of loss, on SGH but care not a jot. It has added to my learning. The most expensive university in the world is the market but it also prepares those who take the lessons for a rewarding future.

Expand

So what you are saying is that SGH failed due to the very unsporting behaviour of the UK insurers who delayed settlement of SGS's claims, plus just a little miscalculation by the board in over-leveraging, which of course was then taken advantage of by all those vile shorters.

So really just a case of the company not quite fulfilling its potential due to factors outside its control ?

Well that's a relief - I thought it might have had something to do with the SGH board deciding to spend $1.3B on a UK company which was making an annual loss of more than GBP130M, and then - after realising all their cash was disappearing into the SGS black hole, stood frozen like a deer in the headlights.

Last edited by mike8654: 27/03/18

SGH Price at posting: $3.33 Sentiment: None Disclosure: Not Held
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Last $43.44		Change -1.200(2.69%)		Mkt cap ! $18.15B

Open	High	Low	Volume
$44.34	$44.36	$43.44	361.4K

Buyers (Bids)

Vol.	Price($)
480	$43.45

Sellers (Offers)

Price($)	Vol.
$43.85	2500

Last trade - 16.25pm 08/07/2026 (20 minute delay)

SGH (ASX) Chart