Dick Smith was floated at A$520M — two years later it was in administration

Dick Smith was an Australian institution — an electronics and hobby retailer whose name had been on the high street for decades. In November 2012 the private-equity firm Anchorage Capital Partners bought the business from Woolworths for A$115 million. Just over a year later, on 4 December 2013, Anchorage floated Dick Smith on the stock market at a market capitalisation of A$520 million, booking what it said was a A$146 million gain on a business it had bought at a discount.

The company that had been sold to the public did not stay healthy for long. On 30 November 2015 Dick Smith surprised the market by announcing a A$60 million inventory write-down — even though its accounts for the previous June had been audited with no adverse findings. The write-down shattered confidence, and the company's secured creditors, the banks, moved to protect themselves.

On 5 January 2016 receivers and administrators were appointed to Dick Smith. Customers who had bought gift cards for Christmas were told they would not be honoured, and within weeks employees were given notice that they would lose their jobs. The float and failure became the subject of a parliamentary inquiry and an investigation by the corporate regulator, ASIC; critics called the listing the greatest private-equity heist of all time.

Dick Smith is a textbook case of a buy-and-float that left a hollow company behind. A retailer can be bought, restructured and sold to the market at a handsome valuation and still be carrying the seeds of its own failure; when the inventory write-down came, the banks that had been kept senior pulled the plug, and a household name was in administration barely two years after its celebrated listing.