Analysis by Patrick Avenell
SYDNEY, NSW: Over the past 28 months, Clive Peeters’ share price has plummeted from a peak of $3.46 to a devastating low of just 6 cents. Over the course of this value disintegration, CEO Greg Smith has endured the worst of media speculation: the company was set to be taken over, the creditors were being called in and his business was on the verge of collapse.
In November last year, under the headline Clive Peeters’ owners suffer through Black Monday, I documented how substantial shareholder Kap Investments had lost $23,000 per day between its original investment and 11 November. In In another article, published in October 2008, I pointed out that Greg Smith had overseen a 94 per cent drop in the company’s share price.
Even as far back as June 2007, Current.com.au was following Clive Peeters’ woes, with James Wells publishing an article under the headline Clive Dive as share drop 20% after profit downgrade.
Throughout all this, Current.com.au was reporting the facts. What we didn’t know, and what Clive Peeters CEO Greg Smith didn’t know either, was that a rogue employee was in the process of siphoning almost $20 million from the business. We asked Smith if this misappropriation has had an effect on the share price.
“It definitely has to have been a major factor,” he said. “If you look back over the last 12 to 24 months in terms of the challenges that we’ve had to face as a company, including the economic downturn, it is a very sobering thought, that had this not occurred, this defalcation, we probably wouldn’t have had many of those challenges.
“The strain that that’s put on our organisation, and also on the senior management, to cope with this missing cash unwittingly, at the same time as going through one of the worst downturns in probably 50 years, from a discretionary retail perspective — to sit and here and think, ‘God, we wouldn’t have had to have gone through all of that, had this not happened’, is quite a sobering thing.”
Today, the sun shines a lot brighter on the Clive Peeters business, with news that the group is in the process of recovering around $20 million in misappropriated assets. It doesn’t make up for the stress and personal disappointment of the past two years, but it does justify Smith’s persistent optimism about the viability of Clive Peeters.
Throughout all the negative headlines, which have ranged from “Clive Dive” to “Black Monday”, Smith has remained sanguine, assuring the market, his suppliers and the media that all was not lost. Now that this misappropriation has been discovered, Smith is enjoying the perverse irony that his business may actually make money out of this event, assuming his rogue employee had astutely invested their ill-gotten gains.
Smith concluded by repeating his claim that this remarkable act of sustained financial misappropriation has been a significant factor in the group’s trading woes. As always, though, he retained his status as the supreme optimist of the local consumer electronics industry.
“I think it has impacted the share price; it’s obviously impacted our trading performance and going forward, though, we get the chance to redeem all of that.”
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