Dick Smith collapse: Nick Xenophon calls for ASIC and former private equity owners to front Senate inquiry

Independent Senator Nick Xenophon says Australia’s corporate watchdog and the former private equity owners of Dick Smith have questions to answer following the collapse of the electronics retail chain.

Xenophon is pushing for a Senate inquiry into the circumstances that lead to Dick Smith Holdings being placed in voluntary administration and then receivership on Tuesday.

He said yesterday he has written to the Senate Economics Reference Committee, of which he is a member, asking for the committee to conduct an inquiry into the collapse, which would involve calling the Australian Securities and Investments Commission and Dick Smith’s former private equity owners Anchorage Capital to give evidence.

Anchorage Capital purchased Dick Smith from Woolworths in late 2012 for $115 million and floated the business on the Australian Securities Exchange a year later with a valuation of $520 million.

“This collapse highlights the need for close scrutiny of private equity deals in this country,” Xenophon said in a statement.

“Even though the private equity firm here may not have any legal obligation to look after employees or consumers, the fact that they made a killing on the float (or around $400 million) would indicate they have the resources to assist employees and consumers left in the lurch.”

Xenophon said Anchorage Capital has a role to play in supporting Dick Smith’s 3300 employees and honouring the customer gift vouchers that receivers Ferrier Hodgson have said are no longer valid.

The senator said ASIC must also urgently investigate the circumstances that led to the collapse, particularly in terms of whether the company complied with the continuous disclosure provisions under the Corporations Act.

“The corporate watchdog ASIC needs to explain to Australians how this great Australian company went into receivership with seemingly little warning,” he said.

“We also need to know whether our corporate watchdog has in fact been asleep on the front porch while Dick Smith Holdings unraveled.”

Speaking to SmartCompany this morning, Xenophon says this “should not be seen as criticism of ASIC”. 

“There are questions as to whether the current regulatory framework is adequate and whether ASIC has enough teeth to act,” he says. 

Xenophon believes there should be a “natural wariness’ when it comes to private equity investment in Australia, which he describes as a “very big issue”. 

While Xenophon says he will need to “get the numbers” for a parliamentary inquiry to proceed, he says if it does proceed, the inquiry would consider all parties affected by the collapse of Dick Smith, including any SMEs that have supplied goods and services to the company. 

“There are a lot of people caught up,” he says. 

“It’s like a case of pass the parcel… it’s almost though companies keep passing the parcel but inevitably the music will stop. And those left holding the toxic parcel are the employees and shareholders and ultimately the consumers.”

But Xenophon called on shoppers to continue supporting the the Dick Smith brand and its employees during the receivership process, saying they can be assured that the receivers will be able to supply products and honour warranties. 

Tasmanian MP Andrew Nikolic has also spoken out about the collapse of Dick Smith and asked any Dick Smith employees in the state who are concerned about their entitlements to contact his office, according to the Mercury.

Australia’s consumer watchdog, the Australian Competition and Consumer Commission, has confirmed to SmartCompany it is monitoring how the situation affects consumers.

A spokesperson for the ACCC told SmartCompany on Tuesday it is working with other state and territory fair trading agencies in light of the receivership and “will be engaging with the receiver to monitor the approach to consumer issues”.

SmartCompany contacted ASIC but did not receive a response prior to publication.