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A New Dawn, page-635

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Dr.Who

3,014 Posts.

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21/09/18

16:02

Post #: 35759384
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Originally posted by Dr.Who ↑

That is a common sense post frankie. It would appear some are under the misconception that if they lose money on the market they should be compensated, that is take all the rewards but not accept any risk.

There is a polar opposite to issuing bad news. It is equally bad if a company was to prematurely issue bad news, causing a sell-off, only to then perform better than thought. In that scenario people might sell at a loss only to see the SP appreciate some months later.

It is incorrect that disclosure laws relate to telling the market about a Directors gut feeling as they enter the office each morning. One long stream of notices would be issued by company's every day of the week if that were the case. Guidance is just that, guidance. The fact that no prosecution has occurred indicates that guidance had some merit and not pure fiction. Afterall ASIC were snooping around for a year plus it would seem because of Slater's high profile a large part of the press and investing community had them under scrutiny.

Disclosure laws relate to Directors buying or selling stock and major contracts won or lost, there is open scope for anything else material but that means exactly that 'material' not a hunch that it might go wrong.

Quite simply SGH over leveraged. The BOD believed they would pull it off right up to the tipping point in Dec2015. They had the cases to justify the optimism, hence guidance.

Personal Injury is a grey area. Without a doubt the BOD are accountable for making a decision to expand as they did. Investors are accountable for making a decision to invest as they did. The insurance industry is a hard-nosed business. My reflection is short-sellers raised the potential for a killing all it would need is insurers to hold on payouts. Nothing illegal just stalling demanding more evidence of claim. That would be fine if there was not financial pressure to bear due to debt. The combination of internal organisational struggles, debt and a belligerent insurance industry coupled with a sympathetic government was gold to short-sellers. Sell the living daylights out of the SP, pressure covenants and distract management trying fend of the wolves. The perfect storm for what transpired.

Poor management yes. Breaking disclosure laws no. Nothing more than a business gone bad that could happen to any other business. That is the risk every investor takes - part ownership is a company is what it means when buy a share for warts and all.

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Another technical matter.

Do not be under the impression that if the BOD came out and said "we are in strife" that your shares could be sold for a reasonable price. For every seller there must be a buyer. If everyone ran for the exits at the same time trading would stop. If hypothetically a BOD issued a notice saying guidance is withdrawn and we now expect a $400m loss there would be no opportunity to sell at any price - everyone wanting to sell at an instant, the market would throw in an automatic cease trading.

SGH Price at posting: $2.65 Sentiment: Buy Disclosure: Held
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A New Dawn, page-635

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