Hi,
I have been asked to be a lead plaintiff in a class action - anyone have experience with this?
Also more on facebook on the mess............
Joy Ringrose
2 hrs ·
Asset stripping in action: Why is Dick Smith Electronics closing down and why are it's 3,300 employees now out of work? Let's run through a very simple timeline of events in plain English.
1. In 2012 Anchorage Capital, a private equity group, purchased Dick Smith from Woolworths for $115 million.
2. Anchorage pays $20 million in cash with the balance plus interest to follow.
3. Dick Smith has cash reserves of $12.6 million so Anchorage has effectively paid only $7.4 million.
4. On 26 November 2012, Dick Smith had inventory that was valued at $371m but Anchorage now wrote the value down by $58 million.
5. In 2013 Dick Smith had EOFY clearance sales where the stock was sold off. The clearance sales saw $200 million of stock sold for $140 million (the operating cash flow) but due to the write downs $7 million was profit. Dick Smith did not restock the inventory so the $140 million was now classed as profit.
6. Anchorage uses $117 million of the "profit" to pay Woolworths the balance of the purchase plus interest and uses the rest to open 15 new stores and take over the electronics departments of David Jones to maximise the company’s initial public offering (IPO) valuation.
7. Anchorage now has a company with little inventory, huge sales growth and big profits. The books look amazing and Anchorage now forecasts a huge profit for 2014 and the business is floated on the stock market at $2.20 a share which brings in $520 million.
8. Anchorage sold the last of the shares in late 2014 and walked away with a $500 million return for their $10 million investment two years earlier.
9. The new shareholders were now footing the bill for repurchasing inventory. This should have resulted in a poor operating cash flow, but most of the repurchasing was funded by suppliers. Come the end of the 2015 financial year, the operating cash flow was negative $4 million and the suppliers were demanding payment.
10. The shareholders are now forced to take out a $71 million loan to finance purchases while sales and profit margins are sinking. Now owing $150 million Dick Smith goes into administration.
11. In 2016 the stores are closing down and 3,300 employees are looking for new jobs.
Economist Jason Murphy said Anchorage had used a perfectly legal accounting maneuver to write down the value of its inventory, raise profits through a national fire sale, neglect to restock shelves and open a massive number of new stores to maximise the company’s IPO valuation. It’s what private equity firms do, and why some people live in $12 million harbourfront mansions, while others scratch their heads wondering what just happened.
It's just an example of how capitalism works!
and
Simon Boatswain
25 February at 21:24 ·
Righto. Yes, Dicksmith is closing.
It's time to set the record straight on how and why. I'm not supposed to talk about work on social media but what are they going to do...sack me?
I encourage you to share so people know what really happened.
Dick Smith sold the business back in the early 80's to Woolworths who did a great job at keeping it growing into a great business we once knew as really friendly and full of useful advice with the best service around.
The demise starts with one word...GREED!!!! The worst incident of greed I have ever been witness to in my life. It is really sickening when you know the full truth about how only a few low-life scum bags can devastate nearly 3,000 people and their families. You'll understand where my frustrations come from shortly.
Dick Smith himself grew this business from nothing more than his hobbies and interests, he started something that should have stayed with us for many years to come.
Only a couple of years ago a company called Anchorage Capital bought the business with nothing but the intention of lining their own pockets at the expense of the Dicksmith company. They knew what they were doing from the beginning. This was not an accident, it was planned, they planned to make a lot of money and destroy a company without batting an eyelid
This snowball started when ANCHORAGE CAPITAL (don't forget that name) bought it a few years ago and started making everyone redundant who were was experienced, and well paid, in an attempt to save money but quite the opposite happened. The inexperienced newcomers lacked the knowledge to keep the machine running. The wrong products were bought in the wrong quantity and the company started to feel the decline in sales from the lack of technology on offer in their stores due to funds being redirected to unsaleable products
To give you an idea of the blunders I have enough phone cases in my store to nearly cover half a tennis court, for only 5 makes of phones
The next thing they did was prepare the company to float on the market at $512,000,000...for something they only bought for...lets just say less than $95,000,000 only 2 years ago. Your probably thinking...WHAT?...HOW? It was very easy.
They immediately turned those $5 cables hanging on the hooks to $25 and then adjusted their books to reflect the total assets they had from adjusting the price. Its almost like grabbing your wallet or purse and taking out a $10 note and saying "this now worth $50"...and they got away with it, hence the lack of growth.
The media was the final blow to Dicksmith. The administrators were doing a fantastic job at trying to breathe some life into the business but there was such a drop in customer sales from lack of confidence that it literally halved sales across the board and it could no longer create enough revenue to make it a viable opportunity for the prospective buyers.
Had the media done its research it would not have dealt such a devastating and final blow. There were many untruths within the media hype and yet not one single apology notice was issued. A prime example is when the media told customers they would not get their deposits back from their laybuys. Dicksmith hasn't had a laybuy option for 4 years...so I would have to agree, no one will be getting their laybuy deposit back as there was never one to give back.
It is a sad day for many patriotic Australians
Simon Boatswain
****************
Anchorage received 2 awards in 2014 for how well they had managed the Dick Smith purchase and "turnaround"
