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Biggest Stock Market Scams in History

  
  Education
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There are so many to choose from that these are the ones from the 1980s and the 1990s. More will follow!

1. Barry Minkow

SCAM: Barry Minkow

A 15-year-old kid, which makes the story all the more worthy. The guy went from nothing to millionaire, with an IPO and hit the big time. Then, he ended up in prison to pay for the dastardly deed. You have to admire him though. A smooth-talking crook as good as they ever get.

He founded ZZZZ Best, a carpet-cleaning and restoration company at the age of 15, in San Fernando Valley. He had trouble making ends meet and despite his idea, he had banks closing down on him at the start because he was under age and minors can’t sign contracts or checks. He joined forces with Tom Padgett and forged documents for carpet restoration, stating that he was working on various projects to make it look like he had business. They set up a company to front the operation, Interstate Appraisal Services. The fake company gave the banks the ‘proof’ that he was raking it in and everybody believed him. Kids don’t lie, do they? The insurance company amounted to some 86% of his revenue. But, that was all fake. The carpet-cleaning company was bone fide, though. He financed his carpet-cleaning business by check-kiting schemes: he wrote checks from account X to finance account Y, and then wrote checks immediately from account Y back to account X and the money (which never existed) just got transferred from one account to another. Child’s play, wasn’t it? Now, don’t go getting any ideas, the banks will find out (one day)! (more…)

Mark Cuban’s post mortem on Facebook

  
  Education
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His latest take on the facebook IPO is here. His points are in bold.

1. Say goodbye to the individual investor on Wall Street. Mr. Cuban argues that because the media hyped the FB IPO that Wall Street is to blame. OK, I agree the IPO was hyped. But is that Wall Streets fault? Isn’t it the media’s fault? Isn’t it the buyers fault for not doing their due diligence? Didn’t Morgan Stanley spend millions propping up the stock the first day?

No one has long term success by reading any single piece of media, especially without knowing the writers intentions.

Here is a brief explanation on how the market works. If there are more buyers than sellers it goes up or vice versa. Or more important right now, if they have the means to buy.

2. The Valuation Bubble in Silicon Valley is bursting – but not for the reasons you think. The idea of private investment seems great but the execution is far off. The value of any market is liquidity. That has to be one of the important factors when making an investment. You know why futures are gaining popularity and what will eventually lead to their demise? A central market place and the lack thereof. Their spawns will kill the market and liquidity. The less central a market place the more likely the forces within that market are able to take control.

Mark agrees with me on liquidity but my interpretation is that he makes an argument against his point not for it. Didn’t the public market do a much better job at pricing? Didn’t the private market fail more dramatically than the public is this case? (Some one that knows the details better than I, when they went public did private shares get converted 1 to 1? If it did not get converted 1 to 1 let me know and I will gladly change it)

I believe Shark Tank is a great reason why Wall Street will always exist. I do not feel bad for the euntrepreuners and or the Sharks. Each assume the other person will add value. Wall Street assumes the same thing but to more people But as Mr. Cuban already knows, not everyone can win. But would they do better if there were 10 sharks or 100 sharks? Would more companies get funded?

If you allow people to be stupid, they will continue to be stupid. Howard Lindzon wrote a post as well that I disagreed with on the basis of access. They are both a lot more successful than I so I could be wrong. Also both of those guys should know that you are more likely to get screwed privately than publicly. I think this might be changing but it hasn’t yet. Open is not bad, closed is not bad, bad is bad. Liquidity and cash is always king, deeper markets should lead to better pricing. (more…)

The next $22 billion ceo

  
Analysis, Education
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Based on what the big investors (like Microsoft) have been willing to pay to own a piece of the company, Facebook now has a valuation of about $23 billion.

 
Obviously, when it goes ipo, it will be worth significantly more.
 
I personally think that Facebook will trade over $100 billion market cap a few years after it goes ipo.
 
That means Mark Zuckerberg, who owns about 24% of Facebook – valued at $5.5 billion based on the $23 billion market cap – will be worth $22 billion at the $100 billion market cap valuation.
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