In 2006, I sat my wife down and told her: I was going to start a company, I would finance it myself until it made sense to raise outside funding or someone showed interest. She asked me a few questions, then I basically characterized the move as saying “instead of trusting CEOs and employees of companies I had nothing to do with and no impact on” I would be betting on myself, my ability to identify an opportunity, recruit a team, determine a business plan and build a company.
It was risky, but pointing to criminal cases like Worldcom, Enron, Arthur Andersen and not-criminal meltdowns like Yahoo! or flat stock prices like Microsoft, I thought it was a no-brainer.
From 2006 to 2008, apart from the odd revenue source from advertising, licensing, consulting, syndication, etc., I have done just that: transferring wealth from my trading account to the company’s balance sheet to cover operations. It’s been risky, no doubt. I think the investment is starting to pay off, but it is indeed crazy by most people’s standards.
Occasionally, however, you see cases where trust in publicly traded companies not only backfires but ruins you.
After seeing Bear Stearns melt away in a week, I turned to Yahoo!’s message boards to see what people were saying. In one post, a man asked how he would tell his wife about the news, news that basically evaporated their retirement money. I feel for the man. He is a victim in this debacle, like countless others. The CEO and senior managers are already lining up their next jobs. The investor, the one we as company managers are supposedly indebted to by way of our fiduciary duty is screwed.
Bear Stearns is not a high flying stock, it’s not a dot com flash in the pan: it is - or should I say was - a venerable 85-year old institution. The stock hit $159 last year, was in the $60s earlier this year, started last week at $45, ended the week at $30 and then sold over the weekend for $2/share.
It’s down 85% this morning, obviously.
It should be noted that the US government stepped in to “help” the company, and a deal this past weekend took place when the markets were closed, after Bear Stearns CEO assured everyone that the company would be fine.
Is it over? You tell me. But Lehman seems to be walking around with a bull’s eye on its back, according to CNN:
Shares of the brokerage firm slid 15% in early trading after the firm said it’s got enough cash to keep doing business. The firm made the statement after a big Asian bank asked traders not to do new transactions with Lehman, The Wall Street Journal reported.
If I owned Lehman Bros., why on earth would I remain in the stock? I am also curious to see how many lawsuits will pour down on Bear Stears and in turn JP Morgan Chase, who bought the troubled financial giant.
Henry Blodget has a good explanation of what went wrong. I touched on this too in “World to US: Who’s Your Daddy?” - based on Blodget’s take, I guess it’s better to sell a part of your financial system to foreigners to avoid what happened to Bear Stearns.
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