Making investments is a tricky business. You want to make sure you pick the right stocks, but you also don't want to invest too much money into any one company and risk losing it all. It can be hard to know which stocks are worth investing in, and even harder to determine when it's time to pull out of a stock and cut your losses.
It's a very mistake-prone process, and it's no surprise that the stock market has seen its fair share of disasters over the years. So at Wisesheets, went down the rabbit hole to investigate the 11 worst investments in history.
So without further ado, here's what we found.
11. Marc Faber's Doubtful Call on the Obama Administration
Marc Faber is a renowned Swiss investor, author, and financial advisor who predicted a collapse in the stock market if Obama won the 2008 election. According to Bloomberg Business, Faber predicted that the market would drop 50% or more after President Barack Obama's reelection, saying that "Mr. Obama is a disaster for business and a disaster for the United States."
Needless to say, that didn't happen. Instead, there was a brief market selloff after Obama's victory, but the stock market quickly recovered and rose sharply as Obama took office. In fact, after nine months following that interview, the S&P 500 had shot up by 20%.
This was a bad call for Faber and cost him dearly, in both reputation and money.
The takeaway: Marc Faber's prediction was a reminder that political predictions don't always come true, and investing with emotion can be dangerous. It's important not to blindly listen to pundits to avoid big money mistakes.
10. Warren Buffet's $8.7 billion gruesome mistake' with The Dexter Shoe Company
"As a financial disaster, this one deserves a spot in the Guinness Book of World Records," he wrote in his 2014 letter.
In 1993, one of the most respected businessmen in the world, Warren Buffett, paid for Dexter with 25,203 Class A shares in Berkshire Hathaway, worth about $8.7 billion today, with the intention of gaining a competitive advantage in the shoe market.
But the billionaire investor failed to consider the long-term implications for his company. As a result, the potential savings he thought he would have by buying out Dexter Shoe instead of developing a new shoe brand didn't pan out, and he ended up paying more in the long run due to a lack of flexibility with his investments.
Fast forward to 2001, and Dexter Shoe Company ran into bankruptcy after Buffett failed to understand the global competition that was forming around the industry. Buffett wrote in his 2014 letter to shareholders that the company was a "gruesome mistake". After everything was said and done, Buffett had to shell out an estimated $3.5 billion to his investors.
The takeaway: Even the great Warren Buffett makes mistakes – in other words, a perfect (or near-perfect track record) isn't something to strive for, nor is it something that constitutes a sound investment strategy or investor that should be followed blindly. Buffett learned the hard way that sometimes you have to let go and accept losses, so don't be afraid to cut your losses and move on.
9. Sean Quinn's Bet Against Bank of Ireland
In the late 2000s, Irish businessman Sean Quinn made a high-stakes gamble against the Bank of Ireland, which cost him his business, reputation, and fortune.
In a huge investment fail, Quinn—formerly known as the richest man in Ireland during his prime— mistakenly put all of his money into the Anglo-Irish Bank using contracts for difference (CFDs), which are derivative agreements.
But the financial crisis of 2008 hit, and the Bank of Ireland was one of the hardest-hit banks. Anglo-Irish Bank had to be bailed out in 2010 by the Irish government, and Quinn's CFDs were all but worthless. It cost the billionaire around €2.4 billion, causing him to file for bankruptcy in 2011. He has been off the radar since.
The takeaway: High-risk bets can backfire, no matter how sure you are of a return, because it's "safe." It's important to think about the potential risks and rewards before investing your money – especially when it comes to CFDs! Also, diversifying investments is key – don't put all of your eggs in one basket like Quinn, or you could end up in a disastrous situation like him.
8. Bill Ackman & Herbalife: A disastrous short-squeeze
In 2012, American hedge fund manager Bill Ackman bet big on a short position in Herbalife. He hoped that his $1 billion dollar investment would result in massive gains when the stock price fell due to allegations of fraud and manipulation. He even orchestrated a campaign to destroy the reputation of the company.
But Ackman was wrong – and he faced one of the worst losses of his career when the stock price rose instead. Bill Ackman lost his billion-dollar short campaign against Herbalife when the Federal Trade Commission refused to prosecute Herbalife as a "pyramid scheme."
Ackman's losses mounted to over $700 million when Herbalife's share prices shot up due to a counterattack from other investors, and he eventually had to close his position in early 2017.
The takeaway: Be careful when short-selling stocks – it can be risky business! As Ackman learned the hard way, it pays to do your research and ensure that you properly understand all potential risks before investing. It's also important to be aware of how other investors may act in response to your moves; Ackman failed to anticipate the countermovement from other investors, which ultimately sunk his investment.
7. Carl Ichan & Blockbuster
In 1994, billionaire investor Carl Icahn bought up a large stake in Blockbuster, the then-popular video retailer. He believed that the company was significantly undervalued and had great growth potential. Unfortunately, he was wrong.
Blockbuster's business model failed to keep up with changes in technology – particularly streaming services like Netflix – and the business was unable to compete. As a result, Icahn lost over $91 million in the venture, and in 2010, Blockbuster declared bankruptcy, and by 2014, all corporate-owned stores had shuttered.
Icahn has been very vocal about Blockbuster's poor management decisions, blaming too much debt and the company's failure to adapt quickly to changes in the industry.
The takeaway:
- The business world is constantly changing and evolving, so it's important to be aware of emerging trends and be able to adapt quickly. Know your market and watch out for signs that a company might not be able to keep up with the times—you don't want to get stuck in an investment like Icahn did with Blockbuster.
- Additionally, it's important to be aware of how much debt a company has, as it can significantly hamper its ability to make business decisions. Icahn's experience exemplifies what happens when a company takes on too much debt—it can easily become unsustainable.
6. Yusaku Maezawa and his day-trading shenanigans
Japanese billionaire Yusaku Maezawa is one of the most successful entrepreneurs in Japan, Even serving as a former chief executive of the e-commerce company Zozo. Yet he, too, has suffered some major losses by investing in the stock market. In 2004, Maezawa became obsessed with day trading – quickly buying and selling stocks to capitalize on short-term price movements. As a result, he invested a hefty sum of his own money, betting that the stock prices would rise.
Unfortunately, this bet didn't pay off – Maezawa lost nearly $41 million in just three months! He was eventually forced to sell off a significant portion of his holdings to cover his losses.
"I was blinded by the virus-driven market swings and lost 4.4 billion yen through repeated short-term trading of stocks, something I haven't familiarised myself with," Maezawa said in a tweet.
The takeaway: Day trading is an incredibly risky strategy and should only be attempted by those with extensive knowledge about the stock market and an understanding of the potential risks. Don't be seduced by short-term price swings – stick to your long-term investing plan and use tools like Wisesheets to stay informed on changes in the stock market. Maezawa's experience serves as a reminder that gambling on short-term stock movements can easily backfire.
5. eBay buys out Skype… all for nothing
In 2005, eBay purchased Skype for a whopping $2.6 billion – at the time, it was one of the biggest – and most confusing – acquisitions in tech history. See, eBay had high hopes that they could integrate Skype's voice-over-IP technology into its auction platform to create a more interactive and engaging experience between buyers and sellers.
Unfortunately, eBay's strategy didn't work out. Turns out, customers weren't interested in using Skype to chat with online sellers. They preferred anonymity. The move was a major misstep, and eBay eventually sold Skype back to its original owners for $1.9 billion – a loss of over $750 million!
The takeaway: As an investor, it's important to think critically about potential investments and understand the implications that they will have on your business. EBay got a little too excited about an idea that they glossed over the research and didn't think about how customers would respond. They serve as an example of how even large, successful companies can make mistakes when it comes to investments. So it's important that you do your own due diligence before making any major investments!
4. Enron's drop from $90/share to $0.062 cents/share blindsided investors
Founded in 1985 by Kenneth LayEnron, Enron was an American energy, commodities, and services company based in Houston, Texas.
They were once the darling of Wall Street – a company that saw its stock rise to an all-time high of $90.75 in August 2000. Yet just one year later, the company declared bankruptcy after it was discovered that Enron had been using aggressive accounting practices to hide hundreds of millions of dollars in debt and losses.
The resulting scandal caused the stock price to drop from $90/share to just $0.062/share and wiped out billions of dollars of wealth for investors who had put their trust in the company.
The takeaway: Even the most successful companies can collapse overnight – so it's important to be proactive about doing your due diligence before investing. And sometimes, you need to understand that a company's fundamentals may not reflect its stock price – whether that's due to manipulation or something else. Enron serves as a reminder that investors should never put all of their eggs in one basket, and that diversifying your portfolio is key to avoiding catastrophic losses.
3. Microsoft's $8 billion dollar investment into the dead phone: Nokia
In 2013, Microsoft made the bold decision to purchase Nokia's mobile phone business in a deal worth $8 billion dollars (including restructuring costs and other miscellaneous charges). This came after Nokia had already been struggling for years to keep up with the demands of the mobile phone market.
Unfortunately, Microsoft's investment turned out to be a huge mistake as its attempt to revive Nokia's mobile phone business was met with failure. The public didn't respond well to the Windows phone. Just three years after the acquisition, Microsoft sold Nokia's mobile phone business to Foxconn in a deal worth $350 million.
The takeaway: Many companies fail to recognize the importance of adapting to changing markets and staying ahead of their competition. This was particularly true for Nokia, which lost ground against its rivals as it failed to keep up with the evolution of mobile phones. Likewise, Microsoft's ill-fated acquisition is an important reminder that, sometimes, it's better to let go than double down on a sinking ship. Investors should also be wary of investing in companies unable or unwilling to adapt to changing markets and consumer needs.
2. Lampert pouring $11 billion into Sears & Kmart
Edward Lampert is an American investor and hedge fund manager who, in 2004, acquired the popular department store, Sears. His plan was to combine it with another company he owned, Kmart. Lampert hoped to cut costs and use the synergies of the two companies to create a larger organization than either could be individually.
Unfortunately, Lampert's plan failed, and the value of Sears shares plummeted from $60/share to just $0.39/share when it declared bankruptcy in late 2018. This loss wiped out billions of dollars for investors who had trusted Lampert's vision.
The takeaway: While ambitious business combinations can be lucrative, they can also be too complex to execute successfully. Lampert's failed attempt to merge Sears and Kmart serves as a reminder not to dabble in a playground where you don't fully understand the rules. The lack of proper business skills, especially when it came to selling the right products, made already struggling companies' downward trend even worse. For everyday investors, it also means double-checking whether the upper management of the company you're investing in has the right skills and expertise to make it work.
1. The massive $83 billion Citigroup merger: The 'Titanic' of wall street
Meet the "Titanic" of Wall Street.
On April 7th, 1998, Citicorp and Travelers Group announced a massive merger worth $83 billion – the largest banking deal in the history of US finance. The move was intended to make Citigroup the world's most diversified financial company and position it well against its competitors. They were expected to have over 100 million customers in over 100 countries.
Unfortunately, this move backfired as the new Citigroup's balance sheet was loaded with risk and bad assets that were not properly accounted for. This resulted in the company having to write down billions of dollars in losses in 2002 and 2003 due to defaults on loans and investments. On top of that, there were reports of culture conflicts, low employee morale, and mismanaged technology.
The takeaway: While ambitious mergers can create groundbreaking entities, it's important to take into account the potential risks involved. Citigroup's failed merger serves as a cautionary tale of what happens when companies make overly-ambitious moves without weighing all the costs and benefits. Be mindful of heavily leveraged companies and the risks that come with them. It's also important to look at a company's culture and morale (an often overlooked factor) to ensure that the merger is not only profitable but also beneficial for everyone involved.
Avoid your own worst investments with the help of Wisesheets 😉
The stock market is unpredictable and risky – and even the most experienced investors can make mistakes. These are just a few of the most notorious examples of bad investments, but they serve as important cautionary tales to remind us that investing smartly is an absolute must if we want to be successful.
Wisesheets makes it easier for stock investors to get all the data they need on their spreadsheets and analyze stocks without the hassle of copy-pasting and manual input. By trying it for free, you can ensure that you're making the best investments for your needs so you don't become a part of the next 'worst investments in history' list 😮💨.
Stay wise and have fun investing with Wisesheets! 🤩🚀
