Gerry Harvey’s retail operation Harvey Norman has no explanation for why its shares tanked badly on Monday.
Nanjing Night Net

The company was responding to a please explain notice from the ASX after its shares dropped more than 8 per cent on Monday – wiping hundreds of millions from its market cap – with no obvious explanation for the rout.

In a statement to the ASX, Harvey Norman said it was not aware of any information which could explain the recent trading.

Gerry himself should be looking for an answer given his personal wealth was down more than $100 million on the day. He even tried to shore up the share price, buying two million shares for $8.7 million and posting a notice to the ASX within hours.

But what caused the rout?

Let’s go through what we do know.

Long time Harvey Norman executive, David Matthew Ackery, issued a directors notice earlier on Monday announcing he had sold $1.5 million worth of shares to pay off an ANZ loan which was secured against his stake in the retailer.

It was the second share sale by a director in less than a week with Gerry’s wife, Harvey Norman CEO Katie Page, selling some stock last week.

Trading in the stock has been heavy since she announced her sale.

The other news of interest on Monday was some research from Credit Suisse predicting who would be road kill when Amazon finally comes to town. iFrameResize({enablePublicMethods : true, heightCalculationMethod : “lowestElement”,resizedCallback : function(messageData){}, checkOrigin: false},”#pez_iframeA”);

Harvey Norman gets a mention, but the impact would not be as bad for the retail giant as would be for rival businesses like JB HiFi, Myer and Super Retail.

Harvey Norman is probably the best insulated from any Amazon threat, according to the Credit Suisse report.

Could it be the markets got scared by a report in Saturday’s Australian Financial Review by Neil Chenoweth?

It raised fresh questions about the byzantine structure that governs Harvey Norman’s franchisee business and the transparency of the company’s accounts.

Especially in relation to the jaw dropping 110 franchise operations which fail each year, and how the losses of these failed shops are recorded in its accounts.

The ASX query asked the retailer about some of the information in the report, including the line in the report about ASIC investigating how the retailer reports its exposure to these losses and troubled loans.

Harvey Norman offered a typically blunt response.

“The AFR article makes false statements and assumptions and then proceeds to make assertions and draw conclusions, which are also false, based upon those false statements and assumptions.”

It might not be enough to head of the short sellers that Gerry was lambasting at the company’s AGM in November, and if the reports of ASIC’s interest in Harvey Norman’s accounts are true – the market might just be waiting for the other shoe to drop.

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