3 ms·

And the reply to that comment: > You ask who “fell” for it? I’d be more inclined to ask who was “In On It”

osullivj 11y ago
Good point. Which AU Investment Bank underwrote the float? IBs always let their friends in at a lower price so they can flip when trading starts. In this case it was float at 2.20, so they would have mates in at say 1.50. IB spreads the risk a little, and IB mates make a quick little earner...
osullivj 11y ago
"Goldman Sachs and Macquarie Capital were joint lead managers, joint bookrunners and underwriters to the Offer. Aquasia advised the Board in relation to the Offer and Minter Ellison was Dick Smith’s legal adviser." [1] So, the usual suspects... [1] http://dicksmithholdings.com.au/events/dick-smith-lists-on-asx/ http://dicksmithholdings.com.au/events/dick-smith-lists-on-a...
- paganel 11y ago
  > So, the usual suspects... I'm reading an economic history of the pre-industrial age, and when talking about the "la commenda" system (https://en.wikipedia.org/wiki/Limited_partnership#Concept.27s_roots https://en.wikipedia.org/wiki/Limited_partnership#Concept.27...) from Medieval Italy, a concept which is one of the earliest forms of capitalism, the author mentions that this system wouldn't have taken roots if the parts involved hadn't had "a diffuse sense of honesty". Also, if one of the parts involved in the commenda contract were to show dishonesty, "after some time nobody would have given him their own savings to use as investments anymore". 800 years since those times entities like GS are as dishonest as a private entity can be, and still people and other companies choose to involve them in their financial dealings. It's, to say the least, most curious.
  - dantillberg 11y ago
    While I'm not an expert on the subject, I imagine that one could counter that today we have analysis tools and financial reporting that give potential investors much more informational leverage than a purchaser might have had in Italy in 1200, and that this information battle is the natural balance for equity exchanges. But regardless, the observation that parties involved must have a "diffuse sense of honesty" in order for a system to function is definitely at play on, for example, ebay, craigslist, private auto sales, yard sales, and the like -- systems where buyers have very little information about the product or reputation of the seller, other than what the seller provides them, to decide whether or not to enter into a transaction. There is a social expectation that people should be honest, I think, and while we would not be surprised to hear of people getting ripped off on craigslist or ebay, and while we encourage others to take the possibility into consideration when making purchases, we (or at least I) nonetheless place the bulk of the blame for fraud on the malicious seller, not the hapless buyer.
    - josho 11y ago
      > we (or at least I) nonetheless place the bulk of the blame for fraud on the malicious seller, not the hapless buyer. I agree, and find the tone of this thread interesting because it is very much reversed. In that blame seems to be falling on the buyer for not knowing better. Yet, it was the seller that seemed to manipulate the business to inflate standard business metrics at the expense of sustainability. Further, the investment banks then turned a blind eye to the state of the business and facilitated the sale. This reminds me of the sub-prime fiasco. Ie. we had a a system where everyone optimized their own position, but overall those optimizations led to net losses. Same seems to apply here--Private equity optimized their own position, Fund managers likewise, yet the company itself is no longer viable. The long term outcome of this is a failed economy unless systemic corrections are made before that happens.
    - josho 11y ago
      > we (or at least I) nonetheless place the bulk of the blame for fraud on the malicious seller, not the hapless buyer. I agree, and find the tone of this thread interesting because it is very much reversed. In that blame seems to be falling on the buyer for not knowing better. Yet, it was the seller that seemed to manipulate the business to inflate standard business metrics at the expense of sustainability. Further, the investment banks then turned a blind eye to the state of the business and facilitated the sale. This reminds me of the sub-prime fiasco. Ie. we had a a system where everyone optimized their own position, but overall those optimizations led to net losses. Same seems to apply here--Private equity optimized their own position, Fund managers likewise, yet the company itself is no longer viable. The long term outcome of this is a failed economy unless systemic corrections are made before that happens.
  - wahsd 11y ago
    I think the answer to your conundrum is that if you place your best on the best dishonest player you are rewarded with higher returns from their dirty and dishonest gains. Why wouldn't you get in on a deal that is totally legal and can turn $10M into $520M in a matter of a couple months?
    - Consultant32452 11y ago
      This is spot on. I don't have enough money to invest in hedge funds, but when I look at mutual funds I look for consistent returns. I don't care one whit about how ethical the management team is. On some level I care that I'm not dealing with Bernie Madoff, but I don't have the time, inclination, or expertise to suss all that out.
  - rlucas 11y ago
    1. I fear you're mistaking the intra-partnership honor for a more general one. General partners [managers or Venetian sea captains] having high trust with the limited partners [investors, Venetian or otherwise] is key to making a commenda, or limited partnership, work. However, that partnership may be formed to pursue transactions adversarial with the rest of the world. If you and I form successive spice-merchant commendas/partnerships over the years, then you and I must continue to trust one another a lot. But we may both be incentivized to repeatedly buy low-end spices, ship them to, say, England, and laugh when they overpay for the bland herbs. 2. Regarding "entities like GS," it's hardly useful to think of them as monoliths, much less as broken partnerships. First, GS is now a public company but used to be a partnership. However, it wasn't like a limited partnership / commenda, in the sense that it had very passive limited partners and active general partners. It was a partnership among people who worked there and the capital involved was largely their own. This is also how a lot of accounting / consulting / law practices have been structured historically. Not a good parallel to the commenda. Second, GS is several businesses. There is a business which helps companies go public, but even that is two businesses: part is advising the company, and part is selling the shares to institutions / syndicate. Who is the customer to whom GS owes the loyalty / honesty in your mind? Let's say company X is "worth" $10 a share in the "honest" mind of the GS corp fin team. Let's further say that the GS sales team has hugely oversubscribed interest at the top of the $8-12 range, and many more institutions want to buy at $12 or higher than are allocated shares. What would you have them do? (Yes, there are a great many potential conflicts and corner cases here. But the idea that GS doing normal IPO flotation work is somehow intrinsically dishonest is baffling.) (There is a decent case, in my mind, to be made for totally disentangling corp fin advisory from sales and trading, meaning not even a Chinese Wall but actual different adversarial firms working on it. But, how many more layers of middleman do you want in our financial system soaking up the fat?)

Good point. Which AU Investment Bank underwrote the float? IBs always let their friends in at a lower price so they can flip when trading starts. In this case it was float at 2.20, so they would have mates in at say 1.50. IB spreads the risk a little, and IB mates make a quick little earner...

osullivj 11y ago

"Goldman Sachs and Macquarie Capital were joint lead managers, joint bookrunners and underwriters to the Offer. Aquasia advised the Board in relation to the Offer and Minter Ellison was Dick Smith’s legal adviser." [1] So, the usual suspects... [1] http://dicksmithholdings.com.au/events/dick-smith-lists-on-asx/ http://dicksmithholdings.com.au/events/dick-smith-lists-on-a...

paganel 11y ago
> So, the usual suspects... I'm reading an economic history of the pre-industrial age, and when talking about the "la commenda" system (https://en.wikipedia.org/wiki/Limited_partnership#Concept.27s_roots https://en.wikipedia.org/wiki/Limited_partnership#Concept.27...) from Medieval Italy, a concept which is one of the earliest forms of capitalism, the author mentions that this system wouldn't have taken roots if the parts involved hadn't had "a diffuse sense of honesty". Also, if one of the parts involved in the commenda contract were to show dishonesty, "after some time nobody would have given him their own savings to use as investments anymore". 800 years since those times entities like GS are as dishonest as a private entity can be, and still people and other companies choose to involve them in their financial dealings. It's, to say the least, most curious.
- dantillberg 11y ago
  While I'm not an expert on the subject, I imagine that one could counter that today we have analysis tools and financial reporting that give potential investors much more informational leverage than a purchaser might have had in Italy in 1200, and that this information battle is the natural balance for equity exchanges. But regardless, the observation that parties involved must have a "diffuse sense of honesty" in order for a system to function is definitely at play on, for example, ebay, craigslist, private auto sales, yard sales, and the like -- systems where buyers have very little information about the product or reputation of the seller, other than what the seller provides them, to decide whether or not to enter into a transaction. There is a social expectation that people should be honest, I think, and while we would not be surprised to hear of people getting ripped off on craigslist or ebay, and while we encourage others to take the possibility into consideration when making purchases, we (or at least I) nonetheless place the bulk of the blame for fraud on the malicious seller, not the hapless buyer.
  - josho 11y ago
    > we (or at least I) nonetheless place the bulk of the blame for fraud on the malicious seller, not the hapless buyer. I agree, and find the tone of this thread interesting because it is very much reversed. In that blame seems to be falling on the buyer for not knowing better. Yet, it was the seller that seemed to manipulate the business to inflate standard business metrics at the expense of sustainability. Further, the investment banks then turned a blind eye to the state of the business and facilitated the sale. This reminds me of the sub-prime fiasco. Ie. we had a a system where everyone optimized their own position, but overall those optimizations led to net losses. Same seems to apply here--Private equity optimized their own position, Fund managers likewise, yet the company itself is no longer viable. The long term outcome of this is a failed economy unless systemic corrections are made before that happens.
  - josho 11y ago
    > we (or at least I) nonetheless place the bulk of the blame for fraud on the malicious seller, not the hapless buyer. I agree, and find the tone of this thread interesting because it is very much reversed. In that blame seems to be falling on the buyer for not knowing better. Yet, it was the seller that seemed to manipulate the business to inflate standard business metrics at the expense of sustainability. Further, the investment banks then turned a blind eye to the state of the business and facilitated the sale. This reminds me of the sub-prime fiasco. Ie. we had a a system where everyone optimized their own position, but overall those optimizations led to net losses. Same seems to apply here--Private equity optimized their own position, Fund managers likewise, yet the company itself is no longer viable. The long term outcome of this is a failed economy unless systemic corrections are made before that happens.
- wahsd 11y ago
  I think the answer to your conundrum is that if you place your best on the best dishonest player you are rewarded with higher returns from their dirty and dishonest gains. Why wouldn't you get in on a deal that is totally legal and can turn $10M into $520M in a matter of a couple months?
  - Consultant32452 11y ago
    This is spot on. I don't have enough money to invest in hedge funds, but when I look at mutual funds I look for consistent returns. I don't care one whit about how ethical the management team is. On some level I care that I'm not dealing with Bernie Madoff, but I don't have the time, inclination, or expertise to suss all that out.
- rlucas 11y ago
  1. I fear you're mistaking the intra-partnership honor for a more general one. General partners [managers or Venetian sea captains] having high trust with the limited partners [investors, Venetian or otherwise] is key to making a commenda, or limited partnership, work. However, that partnership may be formed to pursue transactions adversarial with the rest of the world. If you and I form successive spice-merchant commendas/partnerships over the years, then you and I must continue to trust one another a lot. But we may both be incentivized to repeatedly buy low-end spices, ship them to, say, England, and laugh when they overpay for the bland herbs. 2. Regarding "entities like GS," it's hardly useful to think of them as monoliths, much less as broken partnerships. First, GS is now a public company but used to be a partnership. However, it wasn't like a limited partnership / commenda, in the sense that it had very passive limited partners and active general partners. It was a partnership among people who worked there and the capital involved was largely their own. This is also how a lot of accounting / consulting / law practices have been structured historically. Not a good parallel to the commenda. Second, GS is several businesses. There is a business which helps companies go public, but even that is two businesses: part is advising the company, and part is selling the shares to institutions / syndicate. Who is the customer to whom GS owes the loyalty / honesty in your mind? Let's say company X is "worth" $10 a share in the "honest" mind of the GS corp fin team. Let's further say that the GS sales team has hugely oversubscribed interest at the top of the $8-12 range, and many more institutions want to buy at $12 or higher than are allocated shares. What would you have them do? (Yes, there are a great many potential conflicts and corner cases here. But the idea that GS doing normal IPO flotation work is somehow intrinsically dishonest is baffling.) (There is a decent case, in my mind, to be made for totally disentangling corp fin advisory from sales and trading, meaning not even a Chinese Wall but actual different adversarial firms working on it. But, how many more layers of middleman do you want in our financial system soaking up the fat?)