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...
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.
To be fair the buyer can say that the products are obsolete so the inventory cannot be valued at $371m.
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.
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.
The extraordinary thing is buying a business with $371m of inventory for $115m.