A cautionary tale on the hype

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Question: I got quite excited about all the hype about Slater & Gordon and bought it at $7.90. I am now concerned at its dramatic drop in three weeks. How long do you think it will take before I see it in positive territory and what is your long-term view of this stock? Do I reluctantly now cut my losses and run?

Answer (By Paul Rickard): There is a good lesson here – don’t get excited about the media acquisition hype.
Unfortunately, the track record of Australian companies buying companies offshore is pretty appalling – so the odds are against Slater & Gordon making this acquisition work.

Of course, there has been a two for three accelerated rights issue – so the fall in the share price is not quite as bad as it looks.

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