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Gambling With Investments

Stephen Baldwin sued Kevin Costner over an investment Mr. Baldwin made in a startup company named Ocean Therapy Solutions that was put together by Mr. Costner to sell to British Petroleum a number of machines designed to clean raw crude oil from open sea water.  This was right after the Deepwater Horizon explosion and oil spill that resulted in millions of barrels of raw crude polluting the Gulf of Mexico.  Mr. Baldwin was one of the early investors in the company, but then decided to pull his investment out.  British Petroleum signed a letter of intent with the company but had yet to commit to buying the machines.  Mr. Baldwin sold his shares in the company for half a million dollars.  Shortly thereafter, Ocean Therapy Solutions closed a fifty two million dollar deal with British Petroleum.

It was Mr. Baldwin’s contention that Mr. Costner had purposefully deceived him.  He calculated that if he had held any idea that the company was so close to closing the deal he would’ve made millions of dollars had Mr. Costner been forthcoming.  The trial took two weeks.  Eight jurors deliberated for two hours.  In the end, they found in favor of Mr. Costner.  Mr. Baldwin knew that the sole purpose of the company was to sell machines to the derelict oil company.  He knew the deal was in the works when he pulled the plug.  How it was Mr. Costner’s fault that he decided to take the money and run ahead of time was never established.

A few weeks ago Facebook had its initial public offering.  People stood in line to buy shares in the company at thirty eight dollars apiece, ready to buy into the social media phenomenon.  Rumors were rampant that the company was easily worth a hundred billion dollars.  But as soon as the Facebook shares went up for sale they sputtered up a couple of bucks and then started a spiraled down to less than twenty six dollars.  A lot of people have lost a lot of money in their rush to be first to invest.  And now those people are screaming bloody murder.  Facebook Inc., its officers, and the underwriters who helped make the IPO happen are now being sued in a class action suit because the company did not publicly disclose that it would suffer a reduction in revenue growth through the remainder of this year.  How that information got out to all the people who didn’t go gaga for Facebook has yet to be determined.

It sounds a lot like job creators, the people we used to refer as the rich and wealthy, are fighting with other job creators over investment monies that were intended to create nothing but profit without causing a single job, unless you’re talking about hiring an attorney.  Somebody’s investment strategy didn’t quite work the way they thought it would and now they want to be compensated and they’ll use the courts to get it.  If British Petroleum never bought the oil clean up machines and Mr. Costner and the rest of the investors went belly up Mr. Baldwin would have been patting himself on the back over his uncanny business acumen over the bullet he dodged.

If the Facebook IPO exploded like so many investors thought it would all of those investors would have been laughing all the way to the bank rolling their wheelbarrows of profits.  Facebook went from nothing to speculation that it was worth a hundred billion dollars in just a tad over eight years.  Surely its meteoric rise in value would be all but guaranteed.

However, now that the platinum goose is looking more like a daffy duck, people who used their wealth and/or prominence to pull strings in order to get a seat at the Facebook IPO table are now claiming they had no idea what they were getting into.  Listening to the sob story of these seasoned professional investors and one would think that the Facebook cash cow was nothing but a Ponzi scheme and its founder Mark Zuckerberg was in cahoots with people like Bernie Madoff and Jack Abramoff to cheat unsuspecting greenhorn investors with lots of money to spend into funding his extravagant lifestyle.

Maybe some people out there are more understanding of the plight of job creators trying to earn an honest living by making a quick profit.  But I find these sad stories of rich people’s investments gone wrong difficult to sympathize.  If these people wanted guarantees they would’ve put their money in something a little safer like a treasury bill or an old fashioned certificate of deposit.  Instead, they took a risk with their investment money and, unfortunately for them, made the wrong bet.  And in the world of big investments where the payoff can be substantial, sometimes bad bets happen.  If they didn’t everybody would do it.

Trying to hold someone else responsible when the outcome of an investment decision isn’t as golden as we thought it would be isn’t how we are supposed to play the game.  There’s a reason the payoffs are bigger when the investment is riskier.  You just might lose.  And when failure happens or you’re not as successful as you thought you would be, in the wise words of conservative presidential contender Herman Cain, blame yourself.

Friday, June 15, 2012 - Posted by | Life, Thoughts

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