Dick Smith goes into administration

Heck I was about to buy a soldering iron. It could have been the clincher sale that saved the day.

 

When they were launching the IPO, I always wonder how a business bought for $20m could be floated for 25 times the purchase price. Now it's all clear!

 

Geez this reminds me of below post from NSL thread from 1 December ;

I think there is a simple and useful heuristic here that can save the average punter from a lot of heartache ; do not buy what private equity is selling.

Stuff like AHY and LNK which has the prospects of being good investments, wait for 2-3 full years post listing, thereby you won't find yourselves in a situation like SPO or worse, DSH.

Forager will be a big winner out of this, I am seeing that blog post everywhere

 

I see how that reads. I did mean I read that DSH went into administration at 10pm the night before last. I was talking to Corey about it on chat just Monday lunchtime and BANG...gone.

I did read your link and knew someone posted it somewhere, but wasn't sure the thread so I Google it.

pinkboy

 

Have you been splurging in the post-Christmas sales buying furniture & now have to give it that 'lived-in look' replicating burn marks?

 

Doesn't surprise me - as soon as they moved away from their original core business, that made them unique, such as the "build you own" kits for kids and into competition with the zillions of other electronic goods retailers they were doomed.

A good example to other business - find your unique space

 

I read a somewhat hilarious account of what happened.

That PE firm purchased it for a bargain basement price o$20m. The fund this, they sold almost all the company's stock. So the purchase basically paid for itself. They then got a huge loan to buy more stock, and floated it with a supposed value of $355m. Enough investors were convinced that it was worth that much, bought in, and well, here we are.

 

How very perceptive of you. It's only been linked in this very thread a couple of times.

pinkboy

 

Don't be harsh... I am interested enough to read what's been posted in the thread but not interested enough to bother clicking into the links. Jaybean's post adds interesting background info for people like me.

 

Yeah me too.
A bit busy while at work, needed the tl;dr version.

 

But the interesting part is the detail, not the high level

 

Anyone who doesn't read the article is missing out on a great read and a very informative piece with genuine value for anyone who has ever considered investing in shares. While it's specific in nature the stuff it covers is very widespread.

 

Firstly, Thanks! That article has got to be one of the best reads for 2015.

I'm always weary of electronic retail shares due to environmental impacts and tight margins.

A relative said to me 9 months ago as we were shopping at a DSE that he buys electronic retail shares all the time because he believed they offered value and we the consumer cannot contain our need for gadgets, gizmos and doobewhackers etc.

I said to him I personally avoid them as the margins are tight, competition is ever increasing and the value of the goods in question are constantly decreasing as the hunt for online bargains is ever increasing. Dropshippers are taking a major slice of the market, the middle man who is smart enough to orchestrate a deal can make a killing so that leaves retailers and foot traffic, thanks but no thanks.

Once again, awesome article, I've added that Bristlemouth Blog to my bookmarks for weekly reading.

 

Its those mexicans who bought at 25x ...just like they are now doing in brisbane

 

That article is a fantastic read, thanks for posting it. For someone like me who's only recently began to dabble in the share market it's a real eye opener.

 

k
Agree, you hear things like this done in theory..... I wouldn't have known how they actually put it into action without looking at the link.

 

Surely it can't be legal.
Is there any chance someone will be responsible or is it just how it goes at that level?

 

Indeed the devil is in the detail.

I just read the article - it wouldnt open for me yesterday. I wonder if the writer had done any annalysis on the company at the time of the equity raising.

I would say that there is a very small percentage of people who can read, and unerstand, financial statements. I even know a lot of accountants who, although being able to 'build' the financial statments cant comprehend what they mean. (Im not saying that I can read and understand them well).
The balance sheet movements will tell you more about a company's performance than the P&L - yet it is ussually overlooked as "it just tells you what assets a company owns"

Blacky

 

Provided that they gave all information to prospecive buyer, and didnt hide any of it, it is perfectly legal. The fact the buyers coudnt read the financials isnt their fault.

They have stripped the business in order to sell it. It is nothing unusual nor uncommon. Most business will do the same. Hence - buyer beware - esspecially if you are buying a business.

One thing they my look into is how did the auditors give the company a clean bill of health in August 2015, and by Jan (following the busiest retail period) it falls into administration. The timing is dubious. But again...its smoke and mirrors.

Blacky

 

cashflow and profitability are 2 separate things...