[pjc50]

Why criminal charges? He wasn't defrauding members of the public, all the relevant information is in the balance sheets (as we can see in this blog!) and the investors who lost out were big equity market players who really should have known better.

The extraordinary thing is buying a business with $371m of inventory for $115m.

[caf]

It sounds like there wasn't sufficient information provided at the time of the public offering to do this analysis. The article author writes in the comments:

We were talking about this yesterday. The problem is that they only have to provide you with a balance sheet at one point in time. We knew it was fishy at the time of the float but there was no way of working all of this out until you can see a time series (and, importantly, they had to give you the old balance sheet as part of the business combinations note). The $170m of inventory in the prospectus was roughly two months sales, about the same as JBH. Looks low but you wouldn’t think only half of what is usually required.

The pre-float article is here: https://foragerfunds.com/bristlemouth/bristlemouthdick-smith...

[eru]

Buying into an IPO with insufficient information is still pretty stupid.

[markdown]

> and the investors who lost out were big equity market players who really should have known better.

Why do you believe there are no mom-and-pop investors in Australia? What gave you that idea?

> He wasn't defrauding members of the public, all the relevant information is in the balance sheets

The balance sheets were cooked... as explained in the blog post! The strategy was to do whatever was necessary to show good numbers at a single moment in time (a balance sheet is a snapshot in time). To do this, they had to basically destroy future profitability while making it look like the forecast was exceptional. This wasn't incidental... this was a deliberate strategy to mislead the Australian public and con them into thinking that the company had a bright future.

[AmirS2]

Don't forget that the money that the "big equity market players" invest is mostly held on behalf of members of the public, in their pension and investment funds, so the public is definitely affected.

[PeterisP]

To the extent that the public is harmed in this way, for this harm all responsibility lies on the administrators of those pension and investment funds for making an unwise purchase.

[sumedh]

> The extraordinary thing is buying a business with $371m of inventory for $115m.

To be fair the buyer can say that the products are obsolete so the inventory cannot be valued at $371m.

[petecox]

I've bought several things from Dick in the past 12 months, mainly click-and-collect, where they're competitive with other online retailers when specials are posted via ozbargain. Or a wireless mouse that's cheaper than the supermarket aisle.

But the stock in store? they were recently selling HDMI cables for about $12 that had been discounted from $55. Having low turnover stock sit on the shelves that is vastly inflated in price is what got them in this mess.

The real worth of the goods was probably closer to $115m, but treble the valuation based on insane highway-robbery retail markups.

[yvdriess]

The evils of abstraction.

[pjc50]

Cryptic comment: abstraction in the programming sense, or the slightly old-fashioned use to mean "stealing"?

[plesner]

Not my comment but I think of it in exactly the same terms. You abstract the details of the company away and reduce it to some key numbers, the company viewed at a high level of abstraction.

The company gets to abstract away information that might cast them in a bad light, like bad working conditions, environmental impact, bad financials, etc., and maybe lets them screw over investors. But what makes it really "evil" (thought I don't think evil is a helpful concept to invoke) is that it can also help investors by giving them plausible deniability, they can invest without being bothered by unpalatable "implementation details". It can be used to make it easier to externalize the cost of doing business for both company and investors, to the detriment of the public.

Not necessarily what the original comment meant but it's why I think of it in those terms.

[arethuza]

Isn't that abstraction that investors get limited liability? If I invest in a company I don't want to be liable for any possible losses other than the capital I invest.

[robryan]

Book value, their assessment of what they could get from liquidating the stock and the costs involved might have made it not worth it.