In the world of finance, wealth can be easily gained and just as easily lost. Discover the thought-provoking stories of the Groupon founders, traders navigating wild market swings, and the stark realities that challenge the notion of “buy and hold.” This is a little bit of a journey into market history, so if you move on without reading every word…
Just remember –
“Those who do not remember their past are condemned to repeat their mistakes. Those who do not read history are doomed to repeat it. Those who fail to learn from the mistakes of their predecessors are destined to repeat them. Those who do not know history’s mistakes are doomed to repeat them.”
I was leafing through a series of old charts the other days when I came across GRPN (Groupon) I hadn’t seen an updated chart for ages so decided to have a look and see if anything positive had happened since the last time I looked – spoiler alert it hasn’t as can be seen by the chart below.
GRPN had a rather spectacular fall from grace from rejecting an $8B offer from Google to hitting a high of $622.80 and a market cap of almost $16B to running foul of regulators and eventually bottoming out at $2.89. So much for buy and hold. However lately, it does seem to have been a positive hunting ground for traders.
Whenever I revisit some of these corporate disasters I always have a series of thoughts.
- What are founders thinking when they are offered staggering sums of money to simply walk away and leave the keys behind them? Perhaps it is a variation of the same thinking traders have when they have a position go from $1.00 to $10.00 within a month. Maybe if it has gone up 1000% in a month it will go up 1000% next month and then another 1000% the month after that.
- What are traders/investors thinking when the stock they bought at $622.80 is now $2.89?
- There will be someone who bought at the high and sold at the low – there should be a t-shirt for these people.
- Buy and hold is a profoundly stupid notion that is constantly defeated by market data.
- Some losses are catastrophic and can never be recovered either financially or emotionally. The founders could have walked away billionaires. I have seen the same thing in traders I have a colleague who once left $14M on the table because a company director told him the stock was going to $50 – it went to $0.05 and he walked away with nothing. He never recovered.
- Wealth is easily lost.