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.
But how do they close it if the shares are not being traded?
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).
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.
Are people talking about this elsewhere? Seems awfully quiet for something so big...
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.
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.
Thanks for this mate.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.
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.
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.But as an investor you wouldn't have touched it with a barge pole anyway.
So where's ASIC? I thought the Libs had cashed them up.If it's not permitted by the accounting standard, they probably didn't want to disclose they were doing it.
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.
Here is the linkdoes 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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