Blame and Actions in Dick Smith Case Study

DICK SMITH

Contents
Contents................................................................................................................... 1
Introduction............................................................................................................... 2
Who is to blame.......................................................................................................... 2
Discuss about each blaming object.......................................................................3
Actions can be taken in few short paragraphs with headings regarding to
different blaming objects....................................................................................... 6
Conclusion............................................................................................................. 8
References.............................................................................................................. 10

Introduction
This case study is regarding Dick Smith electronics that was acquired by Woolworths
in 2012. Woolworth acquires the senior employees who have stock options of Dick Smith in
2012 but during this process, the anchorage capital partners managed these stockholders to
purchase Dick Smith shares in 2012 with a worth of AUD $115 million and list it in the
market with a value that is equivalent to total market value of nearly AUD $520 million.
Who is to blame
The issues were found due to the legal liquidation of the company and the blame was found
on the directors and management department of company who failed to maintain the effective
governance of company.
Director-
As director could not give any assure that whether the stock options of the employees
are even safe or not. The financial risk become uncontrollable due to the non-effective steps
of the directors.
Senior management
Senior employees were given updated stock options before it was under Woolworths in 2012
(The conversation, 2016). Employee would have saved the money or the stake by transferring
the self to the private equity as it was highly leveraged and departed from the risk (Foye,
2016).
Anchorage capital
These shares of Dick Smith electronics owned shares inclusive of anchorage capital partners
through which they were offered a right to exchange the share options for the shares but at
last, they lost their jobs and these shares became worthless when 2016. (The conversation,

2016). Anchorage capital used the tricks to turn the books in such a way it turned to reflect it
from $10million to a $520 million. Anchorage held Dick Smith sub holding which is used to
acquire Dick Smith business from Woolworths (Akkeren, Buckby, and Tarr, 2016). It is
found that they have paid $115million whereas, as per the books of accounts, it has been
observed that in 2014 accounts, it is found to be $20 million in terms of cash (Akkeren,
Buckby, and Tarr, 2016).
Investors
The employee may feel secure as the acquisition was greatly funded by debt rather than
equity (The conversation, 2016).
Float adviser
In this case, the blame would be made upon the share transfer agent officer appointed by the
company who failed to intimate the employees to transfer their shares in the equity share.
However, employees themselves would also be liable for the failure to convert their
employee stock option to the equity share capital.
Discuss about each blaming object
Directors
In this case, directors were blamed to the fact that they did not issue the notice to the
employees for the swapping of the shares. However, they were kept separate from this
allegation as they were not bound to send the notice to employees for the swapping of their
shares in the Woolworths Company. It is important to know that directors of the company do
not take hard and fast decision regarding the official sounding profitable prospects as it not at
all ensure the title prospects with an independent umpire for long term.