Robbie Burns’s cautionary tale on directors purchase

I am reading through Robbie Burns’s book Naked Trader. Starting on page 221, he discusses Homebuy’s results from June 2006.

Profits were up 343%, and the chairman said that they were making “excellent progress”. However, net debt increased to £78m, which was actually above their banking facilities of £75m. With profits of £12m, they did not meet Burns’s cap of net debt at three times profit before tax.

A few days after that, the chairman bought £60k worth of shares, and the deputy chairman bought £231k.

A few days after that, the shares were suspended pending “discussions concerning further funding arrangements”. Homebuy subsequently went bust, and shareholders lost everything.

Burns says: “If they’d [investors] looked at the debt, they would never have bought”.

Advertisements

About mcturra2000

Computer programmer living in Scotland.
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s