From Fairfax, Harvey Norman has won a competition for the world’s best short:
New York-based SumZero, which bills itself as “the world’s largest community of investment professionals working at hedge funds, mutual funds, and private equity funds”, recently ran a Best Short contest and gave first place to an entry on the retailer.
…The competition entry was compiled by research analyst Sid Choraria, who works for the Singapore-based boutique fund management firm APS Management.
…Harvey Norman subsidises its franchisees, who operate 198 stores across Australia, to the tune of $100 million in “tactical support” a year, said Mr Choraria, who wrote that it was a model with “limited to no global structural precedent”.
The main reason for keeping unprofitable franchisees going, he speculates, is to maintain the value of the company’s commercial property portfolio. The report notes property is worth more when there are tenants, primarily franchisees, paying rent.
A valuable property portfolio, in turn, allows the Harvey Norman to borrow more.
“What happens to property value and debt refinancing when rents stop rising or franchisees do not receive support?
While that rather sounds like one of Minky’s ponzi borrowers, it’s no worries in ‘Straya where prices only rise.
