Dick Smith Shareholders Prepare For Class Action
Dick Smith shareholders could soon begin a class action against the collapsed consumer electronic retailers, as an investigation by Investor Claim Partner (ICP) nears completion.
ICP originally requested relevant business records from Dick Smith, including any relevant insurance policies, in a claim to the Federal Court in January, backed by funding provided by ICP’s funding arm, ICP Capital.
“The focus of the investigations has been on whether shareholders were misled by Dick Smith from the outset, and until its collapse, with key information regarding its true financial position being withheld or misrepresented,” said ICP CEO John Walker.
Orders from the Federal Court in February then enabled ICP to investigate the company’s business records and determine whether Dick Smith had made representations in its Prospectus.
Additionally, ICP examined the records to look for “Supplier rebates that inflated its reported gross profit, margins and EBITDA” and “Inventory values that caused Dick Smith’s net assets, net profit and earnings to be overstated”.
“The capital markets will be following closely the claims by banks and shareholders against Dick Smith and its directors given the potential for listed retailers to use stock valuations and rebates in the short to medium term to inflate earnings,” Walker said.
“Any failure by a listed retailer to disclose material reliance upon rebates to support reported income and earnings can lead to misallocation of capital by investors,” he said.
ICP is directing Dick Smith shareholders who purchased shares between 25 November 2013 and 4 January 2016 to register their interest in claiming on their website.