In 2003, the board of ASX-listed brothel owner The Daily Planet told shareholders they were heading over to Las Vegas to perform some due diligence:
That announcement is hard to top. But David Dicker’s explanation of his share sales is up there.
The share price of Dicker Data (ASX:DDR) fell 20% earlier this week. That was thanks to an announcement that the IT distributor’s founder, David Dicker, sold $40m worth of shares. In a follow-up announcement to clarify the matter, David told investors that the share sales were to buy cars, purchase a second-hand plane and punt stocks on the US market:
Aside from giving me a healthy chuckle in a time where we need a few, the announcement is an insight into why I like this business. David has always been willing to do things differently.
Eccentricity has paid big dividends
Dicker Data pays quarterly dividends. Its COO, Vlad Mitnovetski, doesn’t get paid a base salary. His entire remuneration is a percentage of monthly profits. The founder doesn’t pay himself a cent in directors’ fees or salary.
But I do think the announcement needs to be taken more seriously by shareholders. First, Dicker Data pays all of its profits out as fully franked dividends. For David Dicker, that was more than $20m over the past year alone. He has enough money to enjoy himself without selling his shares.
The sale, therefore, might tell you something about his thoughts on the current Dicker Data share price (well, the price at the time of his sale, at least). The stock, which we were buying years ago* at 10 times earnings, today trades at some 35 times earnings. And we think those earnings are elevated by Covid.
But it’s also a sign that the impact of this founder on his business is waning.
In my experience, the amount of money someone has outside their business is more important than the amount they have left in it.
David Dicker still has more than $700m invested in his company, a point he stridently made in his announcement.
What sort of person doesn’t care about $700m?
That’s true. No one wants to lose it. But fear can be a more powerful motivator than greed, and $50m of cash in the bank can certainly cushion the blow if that share price halves or more.
All in, versus independently wealthy
Several Forager investors recently thanked me for “toughing it out through two difficult years”. The thanks are appreciated. But the truth is I didn’t have a choice.
In March of 2020, I had almost all of my assets invested in the Forager business and our two managed funds. If that all went to zero, I had less than $100k to my name. I don’t think about that every day. I don’t think about anything else, either**.
That was David Dicker 20 years ago.
I have no doubt that he would love to double his $700m from here. But the message from this week’s announcements is that he’s got other things he wants to do in life. That has been the case for years. He has very little to do with the day to day operations. And it’s completely fine.
It’s just a message investors need to heed. You are no longer betting on David Dicker. You are betting on the culture and business he is leaving behind.
*we sold way, way too early
** my wife has recently made me contribute to the purchase of a house
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.