The Grand Fraud of 2019

by Karl Denninger

It’s baaaaack.

If I stand up a small business and wish to sell shares to unaffiliated people they have to be what is known as “accredited investors.” In other words I can’t just sell stock privately to anyone and the reason this was put in place is to protect the common public from snake-oil salesmen and frauds.

We can argue whether the way this was done is good or bad, but if you can manage to file an S-1 you can make fanciful, even ridiculous claims and sell stock to anyone who wants to buy — even if it’s with their last $50.

In 1998 and 1999 there were a spate of IPOs that, between them, made utterly farcical claims about “total addressable markets”; effectively claiming more in GDP than existed. Obviously that was not going to happen and didn’t; most of those firms literally do not exist today and those who bought the stocks lost, on an effective basis, all of their money.

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