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DSH - DSHE Holdings

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Re: DSH - Dick Smith Holdings

skc said:
If and when the administrator declares that DSH equity to be worthless, the short holders will be able to close their position with an exit price of $0.

However, this process could take some time, so some short holders might choose to cover their shorts if they think the end is nigh. It's better to lock in 90% profit and release the capital, then to be locked up for 12 months chasing that last 10%. I suspect this is why you sometimes see an incredible, unexplained and high volume jump in the share price of a company very shortly before it's death.
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But how do they close it if the shares are not being traded?
 
Re: DSH - Dick Smith Holdings

poverty said:
But how do they close it if the shares are not being traded?
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Eventually the prime broker who lent the share will mark them zero. So there's is no longer the obligation to return the borrow. When you short sell a stock... you have already received the cash (i.e. the sale proceeds). So in essence you keep the proceeds and there is no other obligation against the position.

The process with a CFD provider is probably even simpler... they will just close it @ $0.
 
Re: DSH - Dick Smith Holdings

Just doing some light reading of the Dick Smith Holdings (DSH) Prospectus. Fair dinkum, is this the typical “smoke and mirrors” Prospectus or am I not up to speed, because I could not make "head nor tail" of any of it. The only thing I noted was the "Joint Lead Managers" were the usual f***ing suspects in “Goldman Sucks” and “Macquarie Blood Bank”.

From the DSH Prospectus (with my additions)
What are the key risks for Dick Smith
“Also, the sale of Shares in the future by Anchorage (read - highway robbers) could adversely affect the market price of the shares (read - they will plummet to zero).
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DSH would have to be a great example of why Joe Public are scared witless of the stock market.
 
Re: DSH - Dick Smith Holdings

That's always written as a risk in prospectus.

People have a way of seeing what they want, if they imagine themselves making money, they're more likely to ignore any information that threatens that image.

Dick Smith himself was on TV last week saying he felt sorry for customers, but not for shareholders as they should have known the risks based on known information such as the quadrupling of value in a short time.

But regardless as we've seen with a few different companies, if you hold them less than a year's average returns (EG. less than 7% of your investments) it only sets you back about a year.
 
Re: DSH - Dick Smith Holdings

Has there been an IPO from a private equity firm on the ASX that has been successful in the medium term? I suppose if the POS they are selling has a notional value that puts it in the ASX 200 the index funds have to buy it.
 
Re: DSH - Dick Smith Holdings

banco said:
Has there been an IPO from a private equity firm on the ASX that has been successful in the medium term? I suppose if the POS they are selling has a notional value that puts it in the ASX 200 the index funds have to buy it.
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Quite a lot actually.

Take a look at the following link and you will see a host of reports about PE IPO performance
https://www.avcal.com.au/stats-research/special-reports

AVCAL is an industry body so keep in mind they have a vested interest in making the numbers look good. It doesn't mean they will lie about the data but they could choose the timing of comparison. So read through an older report to see how those companies fared over the longer term.

DSH, MYR are household names so it's easy to relate to. But other more successful household names like JB HiFi have been consistently successful for some time, and certainly can't blame the PE owner should they fail now.
 
Re: DSH - Dick Smith Holdings

Are people talking about this elsewhere? Seems awfully quiet for something so big...
 
Re: DSH - Dick Smith Holdings

skc said:
Quite a lot actually.

Take a look at the following link and you will see a host of reports about PE IPO performance
https://www.avcal.com.au/stats-research/special-reports

AVCAL is an industry body so keep in mind they have a vested interest in making the numbers look good. It doesn't mean they will lie about the data but they could choose the timing of comparison. So read through an older report to see how those companies fared over the longer term.

DSH, MYR are household names so it's easy to relate to. But other more successful household names like JB HiFi have been consistently successful for some time, and certainly can't blame the PE owner should they fail now.
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It really also depend on when during the IPO cycle these companies are listed. Typically, at the height of the IPO cycle the equity markets will buy anything (and at massive valuations) - and this of course means poor performance going forward and all kinds of junks being flogged. You can't blame the seller for price maximisation!
 
The booking of rebates is emerging as one of the chief causes of the DSH collapse. Rebates are a pretty opaque part of retailing but they have pretty big impact on the bottom line. In DSH instance it was, according to the receiver, booking rebates through the P&L instead of as a reduction to COGS. The effect being that it encouraged a big build up in inventory because volume based rebates were booked as profit immediately, but then the stock sat there. It also adds another angle to the Forager article about the big run up in inventory. The rebates were turning an unprofitable business into a profitable one.

His concerns echoed those of Dick Smith's receivers at Ferrier Hodgson, which has alleged managers bought unsuitable stock to generate extra rebates and booked rebates to the profit and loss account rather than against the inventory account, in breach of accounting standards.
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The effect on the P&L is stark.

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McLovin said:
The booking of rebates is emerging as one of the chief causes of the DSH collapse. Rebates are a pretty opaque part of retailing but they have pretty big impact on the bottom line. In DSH instance it was, according to the receiver, booking rebates through the P&L instead of as a reduction to COGS. The effect being that it encouraged a big build up in inventory because volume based rebates were booked as profit immediately, but then the stock sat there. It also adds another angle to the Forager article about the big run up in inventory. The rebates were turning an unprofitable business into a profitable one.



The effect on the P&L is stark.
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Thanks for this mate.

I did a search on the 2015 Annual Report and the word "rebate" only appears once.

It's in the note relating to how they value inventory (ie. total cost less applicable rebates). Which is not exactly helpful in this case.

If there's no note in the accounts, do you know if it was possible to pick up the fact that they were running it through the revenue line rather than COGS? Which obviously vastly overstates the profit in cases where the inventory you're not selling doesn't even make it to the COGS line.

I would have thought they'd be required to include this practice in the Notes.
 
Ves said:
Thanks for this mate.

I did a search on the 2015 Annual Report and the word "rebate" only appears once.

It's in the note relating to how they value inventory (ie. total cost less applicable rebates). Which is not exactly helpful in this case.
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It's not only unhelpful, but if the receiver is correct it was also untrue.

Ves said:
If there's no note in the accounts, do you know if it was possible to pick up the fact that they were running it through the revenue line rather than COGS? Which obviously vastly overstates the profit in cases where the inventory you're not selling doesn't even make it to the COGS line.

I would have thought they'd be required to include this practice in the Notes.
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I think that's a really tough ask. Easy after the fact when the forensic accountants have gone through the books, but as an outsider very tough indeed. I guess you have to ask, do you need to know they're running rebates through the P&L? What we did know was that cashflow was very weak, and inventory was rising rapidly. It now appears we can answer with a bit more clarity the reason those two factors were occurring. But as an investor you wouldn't have touched it with a barge pole anyway.

If it's not permitted by the accounting standard, they probably didn't want to disclose they were doing it.;)
 
McLovin said:
But as an investor you wouldn't have touched it with a barge pole anyway.
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Looking back at my posts in this thread, there was a sense that something was "wrong", but indeed, fairly hard to say what it was as an outsider at the time, but enough of a red flag to not touch it. Looking around the various forums, clearly the "fat yield" was enough of a market siren to see quite a few retail investors burnt though as the knife kept falling.

If it's not permitted by the accounting standard, they probably didn't want to disclose they were doing it.;)
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So where's ASIC? I thought the Libs had cashed them up. ;)
 
McLovin said:
I think that's a really tough ask. Easy after the fact when the forensic accountants have gone through the books, but as an outsider very tough indeed. I guess you have to ask, do you need to know they're running rebates through the P&L? What we did know was that cashflow was very weak, and inventory was rising rapidly. It now appears we can answer with a bit more clarity the reason those two factors were occurring. But as an investor you wouldn't have touched it with a barge pole anyway.
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I remember reading commentary around the time how DSH managers focused on rebates and made wrong purchasing decisions. I didn't connect to the fact that it would also mean the P&L are dodgy.

It's clear that some analysts / fund managers knew about the rebate game on the first profit downgrade. They were able to connect the dots pretty quickly that something has been booked up front and costs were capitalised and hiding in the balance sheet.

I can see why listed companies would want to play this kind of game. The market tend to ignore (or punish less severely) writedowns... especially if the company but in bold "non-cash and one-off". But in most circumstances, these are conscious management mistakes in the past (which were paid for by CASH!) that didn't become obvious until later.

I wish I can do that in my trading. Book profits along the way, then put all losing positions onto the balance sheet. Then every 2 periods I will do a non-cash write off on the inventory... my reported profits would be thru the roof!
 
does anyone has the company prospectus from its IPO in 2013? Will pay $ for the document as I need it for a case study, I can't find it anywhere on the internet.
 

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