Five serious questions about Dick Smith collapse

1. Did banks time the receivership to maximise cash? Forager Funds — the outfit that caused so much buzz since September (in NBR and other financial media, anyway) with its damning posts about Dick Smith — tweeted yesterday: "Question has to be asked whether banks let $DSH trade through xmas knowing they were going to pull the pin but waiting for max cash point?" If so, it won't impress out-of-pocket suppliers, or customers who are losing deposits or hold now worthless gift cards. Note that although Dick Smith's administration was described as voluntary in an ASX filing yesterday, The Australian is reporting it was lead creditors NAB and HSBC who called time and brought in the receivers.

2. A second theory from Forager: "#DickSmith gift card caper sounds dodgy. Sold them with 10% bonus throughout Dec then banks pull the pin before anyone can spend it." This one also did the rounds on Twitter and Reddit (where a photo was posted of Dick Smith gift cards still onsale at Countdown; when NBR checked this morning they were gone). The charitable explanation, which could also be applied to question 1, is that the banks wanted to give Dick Smith a chance to redeem itself with a good Christmas. In the end, it had what it's chairman described as "weak" sales for December.

3. Will Deloitte come under scrutiny? Dick Smith's long-time auditor gave its 2014/2015 accounts a clean bill of health in August, AFR reports. The paper quotes an insider saying Deloitte, which pocketed $A338,000 in fees from Dick Smith for the audit, plus $A103,927 for "other services", will now be "under fire". Why has it had nothing to say about the apparent inventory manipulation, and other hard-nosed tactics (as detailed by Forager), while Dick Smith was owned by private equity outfit Anchorage Capital; inventory mis-management since the retail chain's IPO, or the building cash-crunch that say Dick Smith unable to afford to buy stock post-Christmas, among other issues. NBR asked Deloitte to respond to the points raised by AFR. Head of corporate affairs Ben Findlay offered only: "It is not appropriate for us to comment on client matters."

4. A lot has been made of private equity buyer Anchorage Capital's monster profit (buying Dick Smith from Woolworths for $A94 million* then taking it public for $A520 million), and the financial engineering behind it. But why did Woolworths sell it so cheap? The chain was not losing money at the time. Was the board asleep at the wheel?

5. Former owner Dick Smith has criticised the chain that bears his name for expanding too fast in recent years. Maybe that was an issue, but it has to take its place alongside Anchorage's financial engineering, recent inventory mismanagement and of course the challenge of online e-tailing. But, more, keep your trap shut, Dick. If you're so worried about keeping a company Australian, or how it operates, don't take the money and run. 

There have also been a lot of reader questions about deposits, gift cards and extended warranties. See NBR's Q&A with Consumer boss Sue Chewtwin for comebacks there.

* An initial $A20 million in 2013 plus a payment of $A74 million.

If you are travelling by Air New Zealand, remember Koru Lounge wi-fi provides you with FREE access to NBR ONLINE premium content.