By Janine Perrett

Two companies lose half their value in a matter of hours with not a peep from the ASX.

The market in action, or not-the-Chinese way to handle a share price crash.

Yesterday's stock horror was Dick Smith, last week it was Slater and Gordon. Looking at the latter, it was incredible to watch the ASX as the shares plummeted 51% on Thursday and then opened in apparent free-fall on Friday morning, losing another 36% in the first hour.

It is interesting that when a stock price rises too fast the ASX will often issue a "speeding ticket" questioning why the dramatic surge. 
You would have thought the same applies to a near fatal crash.

Obviously the fact the company had claimed all was on track, "nothing to see here" was sufficient for the authorities even if it failed to convince the bulk of the investing community.

The guiding principle of capitalist markets is to let them sort themselves out. Obviously this era of legal and regulatory protection and constraints is not as constraining as participants claim.

Slater and Gordon shares indeed bounced back somewhat yesterday after management reiterated its' previous profit guidance.

Either they know more than the market (see not always right apparently) or else they are in denial.

Dick Smith is a whole other story. More a cautionary tale, which few seem to heed.

It is a tale, which proves my point that the two words "private equity" are probably the most odious in the world of finance.

To recap, given some must have missed my repeated warnings.

Woolies could not give away the company and finally offloaded for $94 million in Sep 2012. To private equity of course - an outfit called Anchorage Capital. Do remember that name for future reference.

Only a few months later they floated it for a ludicrous half a billion dollars, to claims they were geniuses. Well geniuses at market hype at least.

In reality it was more the investors must have been incredibly stupid to believe a bit of tinkering and window dressing added that much value to the company. After all, they barely had time to do the private equity thing of slashing the staff, cutting costs to the bone and basically raping the company. There were eerie parallels with the Myer private equity experience and disastrously over hyped float. Google that and weep.

They were geniuses but in reality it was just that investors were incredibly stupid to believe that suddenly it was worth that. No the market is not always right. I did point out this had eerie parallels with Myer

So by yesterday Dick Smith was valued at less than the price at which Woolies sold. Who looks a genius now?Oh and don't worry about poor old Anchorage; they sold out a year after that dubious float and made over $370 million dollars.

Do remember their name if ever they have the gall to come back to our market and try the same trick again. It is interesting to note that Slater and Gordon was a much-heralded recent float as well.

Questions need to be asked. A good class action might be in order but damn, Slater and Gordon is probably facing one of their own.