Rise and Fall of Dick Smith Holding Limited Assignment PDF
Added on 2021-06-14
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Finance
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A Report on the Rise and Fall of Dick Smith 1A REPORT ON THE RISE AND FALL OF DICK SMITH(Your Name) Course Professor’s Name Name of Your Institution Location of Your Institution Date
A Report on the Rise and Fall of Dick Smith 2The Rise and Fall of Dick Smith Holding Limited Executive Summary Dick Smith Holdings Limited listed was a well-known retailer of consumer electronic products in Australia. The company was on the list of the firms quoted on the Australian Stock Exchange as DSH. DSH was a large and famous electrical retailer in Australia. The company sold a range of electronic products including mobility, entertainment, office and other electronic products. Having it roots dating back to 1968 with the sole owner bring Dick Smith and his wife,the company has exchanged ownership at some point being owned by Woolworths Limited 1982to 2012. Just before the collapse, Dick Smith was owned by a private equity firm (Anchorage Capital Partners). The company dealt with a diverse array of electrical products across close to 393 stores in Australia and New Zealand boundaries. Before the downfall, the company used to network and connect with the consumers by operating under four umbrella brands namely, the Dick Smith, David Jones Electronics as powered by Dick Smith, the MOVE and Move by Dick Smith Sydney International Airport. The fall of the company in 2016 has been attributed to a big deviation from the targeted profits. Following the downfall, the board of Directors and the creditors appointed administrators and receiver managers to take over the management affairs of the company henceforth. Joseph Hayes, William Harris, Matthew Caddy and Jason Preston wereappointed as voluntarily administrators while Ferrier Hodgson, Jim Steward, Ryan Eagle and JimSarantinos as the receiver manager. The administrators and the receiver managers were required to secure the business operations of the company following the fall and also investigate the issues surrounding the failure. The receivers and administrators were also required to report theirfindings to the Australian Securities and Investment Commission (ASIC) on the possible violations that were made by the company’s management leading to the fall.
A Report on the Rise and Fall of Dick Smith 3IntroductionThere have been many issues surrounding the management of multinational corporations in the recent past. The issues range from poor corporate governance practices, manipulation of a corporation’s books of accounts and lack of transparency in financial reporting. The aforementioned factors together with ethics in decision making are very important things that ought to be observed when it comes to management of a multinational company of Dicks Smiths kind. The spectacular fall of Dick Smith Holdings Limited in 2016 really sparks many questions about the role of the management in ensuring shareholders wealth is maximized. While the root issues surrounding the collapse of Dick Smiths Holdings limited may be attributed to inventory changes and an untimely equity floatation of the business, a more inquiry into the affairs following the fall shows a broader scope on the issues of disclosure that might have been avoidedby the company’s Directors and management(ABC News, 2018). More importantly, a critical analysis of the prospectus issued in 2013 shows that very little information about inventory was disclosed. The Australian Corporations Act stipulates all the pertinent information that should be disclosed by a prospectus before its issue for any fundraising. Dick Smith might have failed to disclose all the details of the financial statements which are required by the investors and their professional advisors in reasonably making an informed decision regarding the purchase of the company's shares. AASB and ASIC are bodies that further outlines the regulatory guidance that is meant to protect the interest of the investors and creditors in a company. This paper intends to analyze critically the circumstances leading to the rise and fall of Dick Smith Holdings Limited since it was acquired by Anchorage Capital Partners in 2012 and the eventual eminent fall in 2016 and report on the findings. To do this both quantitative and qualitative information from a number of sources will be integrated into the report. Moreover, corporate governance principles
A Report on the Rise and Fall of Dick Smith 4that might have been violated by the management of Dick Smiths Holdings Limited are reviewed. Issues Surrounding the Prospectus for Fundraising in 2013 In the business world of today, it is common to find corporations trying to ‘‘dress up’’ thecompany to look like it is performing well financially so as to persuade people to buy shares from it. The prospectus for selling shares in 2013 by Dick Smith might not be far from this. According to insider information from the company, Dick Smiths management is suspected to have manipulated the stock inventories and sales figures of the company to look that the company was making progress and yet that was not the case(Yeates, 2018, np.; Montgomery, 2018, np). This saw the company purchasing excessive levels of inventory so as to aggressively fulfil the alleged rapid expansion of stores and thereby calling for rebates from the suppliers as a way of boosting earnings in the short run.Since Dick Smith had been transited from being a subsidiary of Woolworths to the ownership of a private equity owner- Anchorage Capital, there was an increased pressure to the listing of the company on the Australian Stock Exchange(The Conversation, 2018). Keeping in mind that Anchorage Capital had purchased the company at $ 115 having paid only $ 20 million in cash, there was a big desire for the company to realize a high stock price when it was listed and hence a significant profit from the sale of shares. This aggressiveness for profits of share price was the beginning of failures for the electronics company(Yeates, 2018, np.).
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