Dick Smith shows why too many floats sink

Dick Smith (ASX: DSH) is another in a long line of examples to prove this point. This on the float of Dick Smith from Intelligent Investor analyst Graham Witcomb two years ago: ‘If private equity group Anchorage Capital successfully floats Dick Smith (ASX: DSH) for $520m, its investment will have five-bagged in just one year. Anchorage purchased Dick Smith’s 325 store network from Woolworths (ASX: WOW) for just $94m last November. Is such a turnaround in so little time really possible?’ Graham was rightly suspicious, claiming that Dick Smith was being floated on 13 times forecast and ‘highly questionable’ earnings. The retailer closed last night 87% down on its float price of $2.20. Investors buying stock from private equity (PE) should certainly be wary of floats, despite exceptions. In the past we’ve successfully recommended OzForex (ASX: OFX) and currently have a positive view of IVF provider Virtus Health (ASX: VRT), floated by Quadrant Private Equity in June 2013. Read Full Article Here: (VIEW LINK)