Australian (ASX) Stock Market Forum

Companies that have fallen - a Register

Jump to new
I

Investor

Joined
19 April 2005
Posts
352
Reactions
0
Ladies and Gentlemen,

I am starting a new thread to document the companies that have fallen in recent years (I did not hold any) to see whether we as investors or traders can find lessons learnt in our journey towards the gathering of wisdom.

"People who do not learn from mistakes of the past are doomed to repeat them." (my pet parrot told me this - I call him 'bird brain' and told him he talks too much: :D

1. HIH - losses over $5 billion. Mismanagement. An example of why Warren Buffett places so much emphasis on management. Remember his three criteria for management? At least two might have been missing.

2. Sons of Gwalia - collapsed during a mining boom! Father - Gwalia. Mother - Unknown. Should have been called "Sons of a Gun". Lessons learnt - when you see two brothers who are lawyers run a company, Be Alert and Be Alarmed. :D

3. ION - a small cap that had a delusion that it could take on globalisation forces.

4. RMG - had a business model that was never going to work, IMO. Buying bad debts of financial institutions and trying to collect them. If it was easy to collect those bad debts, would the banks sell them???

5. Sam's seafood. Fireman Sam. Uncle Sam. Sailor Sam....... but Seafood Sam?

6. Pasminco - beware high gearing and watch those zinc prices as chicken keeps reminding us. Watch that zinc :D If it moves the wrong way, shoot it. :D

Any others? Let's keep this register for posterity.

Watch out for the small caps with big price falls recently. The risk might not be worth it.
 
SFO seafood online... It was a while back, undercapitalised and coupled with bad weather to build an aquaculture centre in Bowen QLD was their undoing... The land is still there and is now worth the GDP of a small 3rd world country.
It was my first forray into shares and it was a disaster for me at that stage. Damn those glossy prospectus. In hindsight it was some of the best money I ever spent.


cheers,
 
2 and 6 are boths failures as a result of hedgebook blowups or just plain stupid construction

Pasminco hedged the currency (AUD) and zinc badly and when problems started with Century mine they were done

Sons of Gwalia, again if you have a hedgebook over 100% of reserves you're in trouble if mines shut down or underperform, and buying Pacmin was a terrible inevstment

I think Western Metals comes to mind as another case
 
Investor said:
Ladies and Gentlemen,

I am starting a new thread to document the companies that have fallen in recent years (I did not hold any) to see whether we as investors or traders can find lessons learnt in our journey towards the gathering of wisdom.

"People who do not learn from mistakes of the past are doomed to repeat them." (my pet parrot told me this - I call him 'bird brain' and told him he talks too much: :D
Click to expand...

I think I like your parrot- will you be floating it soon on the market?? Maybe you should take tips from it and start a tipsheet. Good value I bet.

BTW, was OneTel listed on the board? If so probably qualifies. Noted GTM (tiny gold miner) was in a trading halt, huge fall last month, maybe more bad news, might be the end??
 
You left out Harris Scarfe and Henry Walker Eltin off your list. I'm not sure why they both fell over, but I think that some Harris Scarfe had some senior management fraud going on.
 
RichKid said:
I think I like your parrot- will you be floating it soon on the market?? Maybe you should take tips from it and start a tipsheet. Good value I bet.

BTW, was OneTel listed on the board? If so probably qualifies. Noted GTM (tiny gold miner) was in a trading halt, huge fall last month, maybe more bad news, might be the end??
Click to expand...

My parrot tells me that IPO's might not be fashionable for a while, given market conditions, to discourage me from floating it. He also suggested that it might be akin to selling the goose that lays the golden eggs. I said OK, but placed him under notice that if he does not continue to give me good tips, I might outsource his function to India. He is now working harder to ascertain whether the bull or the bear is stronger. :D

You are right about the OneTel mob. It kept asking people to "tell your friends about OneTel". People who did so, might have fewer friends after the event.

A lot of money was lost in all that telling, including by the Packer junior and the Murdoch junior.
 
Fleeta said:
You left out Harris Scarfe and Henry Walker Eltin off your list. I'm not sure why they both fell over, but I think that some Harris Scarfe had some senior management fraud going on.
Click to expand...

I did not hold any shares and did not take much notice.

Yes, Harris Scarfe had some accounting positions that were alleged to have been "cooked" and at least the CEO and I think the CFO, were under investigation. Convictions might have taken place, but I am relying on memory and could be wrong. A subsequent restructured sell-off left the brand intact. Some of the stores are still running, but I do not think / know it is a listed company now.

Henry Walker Eltin was involved in a high risk industry sector. I think the previous CEO / MD, recently committed suicide (I think I read this in the newspaper). He founded the company a long time ago, I think. When the company fell, he found it hard to go on. A pitiful ending.
 
Some more courtesy of today's AFR.

Collins Booksellers
TEAC
RMG
Lincraft
NQ Australia Rentals
 
Oops. I just realised that I should have typed RMG instead of RPG in the top post. Bugger! Joe Blow, can you amend please?

Were the others listed? I did not think they were listed! Was aware of Collins, TEAC and Lincraft as I read about them over recent weeks.

In today's Financial Review, insolvency firms are increasing staff, expecting more insolvencies. Sounds ominous.
 
A small company collapsed today - Didasko. Obscure.

Today's Financial Review reminded me of another company that collapsed in 2003 - Pan Pharmaceuticals (appeared to have been mismanagement and dodgy quality control).
 
In the newspaper today, it was stated:

"The collapse of Sam's Seafood has been referred to ASIC after revelations of multi-million dollar discrepancies in the value of its supplies.

In December 2004, stock on hand was listed in management accounts at $14.6 million. In March 2005, it was listed at $14.1 million.

A full stock-take found actual stock on hand was only $1 million."

Yes...... seafood can swim :D
 
Multiplex, again! Double demerit points for this speedster!! End of the month will bring a more accurate assessment of the damage according to the company. So more falls to come? Probably.
(And No, I don't think they can blame it all on the Mafia snipers).
 
bvbfan said:
.....

Pasminco hedged the currency (AUD) and zinc badly and when problems started with Century mine they were done

Sons of Gwalia, again if you have a hedgebook over 100% of reserves you're in trouble if mines shut down or underperform, and buying Pacmin was a terrible inevstment...
Click to expand...

Pasminco was very highly geared, zinc prices were low (due to oversupply and inadequate demand) and Pasminco's due diligence team did not uncover a big loss on a 'marked to market' position with an off balance sheet derivative instrument on a takeover acquisition.

As for Sons of Gwalia, a broker had a buy recommendation a week before the company collapsed. Wonder whether any of the clients took notice of that.
 
In the Australian newspaper today (I did not check whether the company was ASX listed or not):

Sour grapes as wine fund fails
May 21, 2005

NICK Crouch reckons he knows why he was appointed liquidator of collapsed wine investment fund Heritage Fine Wines. "The only reason I got the gig is because I don't drink liquor," he says. "Also my fridge at home is broken."

These are exactly the qualities required of the man charged with finding a home for an estimated 1 million bottles of wine - including some of the nation's best labels - left in storage after Heritage collapsed last month.

Furious investors in Heritage, who effectively paid the firm to store wine on their behalf before selling it, are demanding the return of wine they paid for. But there are already suggestions that poor record-keeping and storage mean some of the wine has been lost. Some, in fact, may never have existed.

There are issues that Crouch, of Crouch Insolvency, will be forced to wrestle with as he weighs up the rights of the investors and the creditors to Heritage, including its staff.

Right now, Crouch is consumed with finding an alternative home for about 450,000 bottles of Australia's finest wines stored in a cold Miller's Self Storage warehouse at inner-Sydney's Alexandria before the lease runs out next week.

There are about 650 pallets of fine wine all neatly stacked up at the warehouse, some identified, others unmarked. They include Penfolds Grange Hermitage from 1981, 1982 and 1983 vintage, each bottle worth hundreds of dollars. Others are a wide mix of brands -- Torbreck, Fox Creek Reserve, St Hallett, Henschke -- hailing from the Barossa Valley, Coonawarra, Hunter Valley, Yarra Valley and Margaret River.

"I am seeking tenders from other storage specialists and we will start removing the wine stored in Alexandria from next Wednesday," Crouch says.

Earlier this week, Crouch was appointed receiver and manager of the estimated 1.21.5 million bottles by the Supreme Court of NSW.

He was already liquidator of the company, having replaced accountant Peter Ngan earlier this month. Ngan stepped down amid claims his decision to buy ANZ's $324,000 unpaid loans to Heritage -- making him the biggest secured creditor -- created an untenable conflict of interest.

Ngan, who remains as liquidator of rival investment company WineOrb, which failed shortly before Heritage was placed into liquidation, declined to comment yesterday.

With his new powers, Crouch can now take control of the wine stock, move the wine, undertake a stock count and reconcile who owns what.

Matching the identity of Heritage investors with their wine will be particularly interesting as many are bankers, barristers, doctors, politicians and stockbrokers.

"We are doing everything we can to protect the 3000 investors," Crouch says. "A stocktake has never been done before. It's a mammoth job but the guys at the warehouse say up to 80 per cent of the wine can be reconciled to investors.

"On paper, investors have paid $69 million for the wine. But we have been advised there is a suggestion of transfer pricing - in other words, the value of the wine today is less than what was paid for them earlier. We are in the process of investigating the true market value of the wine."

Only the wine warehoused at Alexandria has to be moved. The rest is stored in four other locations in Sydney and Melbourne or in about 50 vineyards across the country.

In a note to investors yesterday, Crouch says he has "engaged appropriate industry experts to assist me with my fresh attempt to prepare a stock and investor reconciliation. I am hopeful, but give no assurances, that up to 80 per cent of the wine on hand is capable of being reconciled to investors.

"My inquiries to date indicate that wine to the value of up to $8 million is partly paid and therefore not available to investors. I am unable to estimate the particulars of other types of stock losses at this time."

Since his appointment as liquidator, Crouch has spent $120,000 on insurance and storage. "I've already spent $60,000 on storage a month, $30,000 on insurance fees and $30,000 on staff wages. This is before my own fees and expenses."

To help him meet the costs of the stocktake, Crouch will seek a court order to allow him to charge a levy of $1 per bottle. "I expect these costs and expenses to be incurred over the next three months to be approximately $1 million," the note says.

Crouch estimates that when he completes the wine inventory in three months, investors can regain their wine.

This is especially good news for Mark Doble, a partner at Raj Lawyers, who represents 50 Heritage investors.

"This is positive news for investors," he says. "The new liquidator has involved the court, so we will put our legal action on hold. I'm sure wine owners would not object to the contribution of administration fees and costs incurred by the liquidator."

Crouch says he has also begun preliminary investigations of the conduct of all directors and promoters of Heritage in the lead-up to its collapse and whether any "breaches of the Corporations Act appear to have occurred".
 
RichKid said:
Multiplex, again! Double demerit points for this speedster!! End of the month will bring a more accurate assessment of the damage according to the company. So more falls to come? Probably..
Click to expand...

I had intended this thread to be for companies that had totally collapsed, but we can expand it to include companies that have suffered big drops in SP.

In today's Fin. Review, on page 47, there are 2 tables that show companies that have had big falls in SP since 1/7/04 (imagine having such a nightmare portfolio);

1. Pacifica - 62%
2. Miller's Retail - 50%
3. PaperlinX - 45%
4. Wattyl - 39%
5. PMP - 33%
6. GUD - 31%
7. Flight Centre - 31%
8. Multiplex - 25%
9. MYOB - 24%
10. Housewares - 24%

IPOs (falls since issue price):

1. Proteome - 82%
2. Creatable Media - 81%
3. Community Life - 67%
4. Dia-B Tech - 65%
5. Argus Solutions - 55%
6. Narhex - 50%
7. ZBB Energy - 46%
8. Southern Gold - 43%
9. Western Gas & Power - 42%
10. Advanced Nanotech - 35%
 
RichKid said:
Multiplex, again! Double demerit points for this speedster!! End of the month will bring a more accurate assessment of the damage according to the company. So more falls to come? Probably.
(And No, I don't think they can blame it all on the Mafia snipers).
Click to expand...

I have a friend who is a builder and does subcontract work for them. He says that their project managers are mostly young guys that have no experience and don't know what they're doing. They have all the qualifications in the world but it doesn't add up to being able to do the job efficiently. They are also known as the biggest company who tries to do over their sub-contractors for work completed, as evidenced with all their litigation in the UK which they were at the wrong end of the stick.

All in all, I think its a bad company with bad management but good marketing. The share price is a reflection of that. :2twocents
 
What about Ansett? A good example of the importance of looking after your cash flow by avoiding bad business deals! You can't keep losing millions on a regular basis and expect to stay in business.



If we're not restricting ourselves to Australia, what about Arthur Anderson in the US and some of its creative accounting practices? From memory it did have an effect on companies in Australia.

:)

_____________________

This is merely my opinion and does not constitute financial advice. When considering your financial objectives, please consult a suitably qualified and licenced professional.
 
ob1kenobi said:
What about Ansett? A good example of the importance of looking after your cash flow by avoiding bad business deals! You can't keep losing millions on a regular basis and expect to stay in business.



If we're not restricting ourselves to Australia, what about Arthur Anderson in the US and some of its creative accounting practices? From memory it did have an effect on companies in Australia.

:)

_____________________

This is merely my opinion and does not constitute financial advice. When considering your financial objectives, please consult a suitably qualified and licenced professional.
Click to expand...

Must be the same ex-arthur anderson guys who looked after Sam's seafood. :D

Now that was creative accounting too. :cautious:
 
DTM said:
Must be the same ex-arthur anderson guys who looked after Sam's seafood. :D

Now that was creative accounting too. :cautious:
Click to expand...

You never know! Sam's Seafood was a case study we use to use in Business Studies as an example of how to do things! We still use it, as an example of how not to do things!!!:D
 
I recently read the book 'The Smartest Guys In The Room' which is about the collapse of Enron. It is a very well written book and contains a lot of information about the way that banks, the SEC, etc. interact with Companies and the way that companies go about disguising problems. I would recommend anyone who takes investing (as opposed to trading) seriously to read it.
 
Top