WeWork, Mullen Automotive, Bed Bath & Beyond… For many stock pickers, prudent investing is no picnic. The others prefer to follow the train of bankruptcies and penny stock. Forbes looks back at the craziest stock market stories in 2023.
Article by Brandon Kochkodin for Forbes USA – translated by Flora Lucas
In 2023, the only thing you can do to make money in the stock market is to invest in a low-fee index fund and sit on the couch. The S&P 500 rose more than 20% and the Dow hit a record high this month. The biggest challenge was sitting and doing nothing.
However, some people cannot stand boredom. It’s hard to get an adrenaline rush from hearing experts say words like “caution.” For financial adventurers, the stock market is a casino, a high-stakes game where the fun lies in studying financial data, analyzing market trends, or, to be honest, rolling the dice and keeping your fingers crossed.
At this end of the risk spectrum lies another category of investors. They are the ones who tirelessly uncover potential gold mines hidden in penny stocks (or penny stock), or which are inexplicably attracted to stocks of bankrupt companies when shareholders risk losing everything. They bet on companies that are barely holding together, convinced that against all logic the stock will soar and that they will drown in money.
Here are some of the craziest stock market stories of the year.
We are working
WeWork’s journey through the public markets was like a Fourth of July fireworks display that started with awe and ended with the city burning down. Under the leadership of Adam Neumann, its charismatic, enigmatic and somewhat charlatan founder, the company boasted a dazzling private asset valuation of $50 billion. Then the script flipped. A failed IPO in 2019, Adam Neumann’s fanfare exit with a $2 billion farewell gift, and a series of revealing documentaries helped lift the veil on the messy methods the company uses to achieve its mission, namely to “raise the consciousness of the world.” Finally, WeWork went public in in 2021 via a SPAC and emerged a bit battered, but still standing and, despite the controversy, worth nine billion dollars, which isn’t too bad.
However, WeWork’s tenure as a public entity was short-lived. The company barely crossed the two-year mark. In November, the curtain came down on a bankruptcy filing that revealed a staggering $18.7 billion in debt, dwarfing $15.1 billion in assets.
As if years of drama had drained investors’ attention, WeWork’s bankruptcy barely raised an eyebrow. Yet days before the company officially threw in the towel, Cole Capital Funds, an obscure Arizona-based entity, said it was willing to buy the company. WeWork shares jumped nearly 150% after the announcement.
However, according to Securities and Exchange Commission (SEC), Cole Capital’s offer was not valid. This should have been clear to anyone who read the press release with even the slightest care. One sentence in particular stood out as a red flag: “We asked God, legal, financial and other advisors to help us with this transaction. » Invoking God is not exactly a common practice in the due diligence process when buying a company. Cole Capital did not respond to requests for comment from Forbesand WeWork declined to comment. Last month, the SEC charged Cole Capital CEO Jonathan Larmore with fraud.
According to the complaint, Jonathan Larmore is behind the fake press release, which was allegedly designed to inflate WeWork’s moribund stock. Target? By cashing out the 72,000 call options he recently purchased and making a quick profit by manipulating the market.
It’s all about timing, though, and Jonathan Larmore’s timing wasn’t right. The press release was not issued in time. His 72,000 options expired worthless just before his fake announcement made headlines and the stock jumped. So Jonathan Larmore not only found himself in a legal battle with the SEC, he was unable to cash out his options.
Mullen Automotive
In theory, Mullen Automotive is a company specializing in electric vehicles. A closer look at his accounts reveals a different story. As of 2021, his revenue was $308,000. The company does not sell many cars. Mullen Automotive’s real business appears to be selling stock to what it calls a “very vocal and active shareholder base.” The scale of these sales is staggering. The California-based automaker’s share count has exploded, from seven million at the start of the year to 311 million today, according to FactSet data and accounting for stock splits. This represents an increase of 4,300% in 12 months.
As expected, the stock explosion had a significant impact on Mullen Automotive’s stock price. The company’s share price fell 99% to $0.13. It’s common knowledge that making cars requires a significant initial investment (just look at Tesla, Mullen Automotive and its shareholders would like to compare).
However, the funds received by Mullen Automotive are not intended only for research and development or expansion of production capacities. A significant portion of these funds go into the pockets of CEO David Michery, who incidentally served as president of hip-hop label Death Row Records. In 2022, David Michery’s compensation reached $6.1 million. When you add in the company’s general and administrative expenses, which include compensation, consulting fees and legal fees, Mullen Automotive spends $75 million a year, mostly on overhead and the CEO. In contrast, the company’s investment in research and development is only $22 million per year.
How Mullen Automotive prioritizes its spending became a hot topic during an interview on Charles Payne’s Fox Business television show in August. David Michery was on air with attorney Wes Christian to discuss the lawsuit filed by Mullen Automotive. The company is suing several brokerage firms because it believes the brokers are aiding in the illegal short selling of Mullen Automotive stock, which is depressing the stock price. Charles Schwab, the brokerage firm sued by Mullen Automotive, said the complaint “contains many dubious allegations and little truth.” Charles Payne pointed out that the high general and administrative costs and David Michery’s high salary were “insane”. When David Michery tried to explain himself, he ended up giving a confusing answer that didn’t really address Charles Payne’s allegations. Wes Christian looked pretty uncomfortable the whole time. Then, as luck would have it, David Michery’s audio cut out, just before Charles Payne could delve into the questionable stock divisions of Mullen Automotive, which the presenter called “crazy”. Mullen Automotive did not respond to a request for comment Forbes.
Bath & Beyond bed
The story begins when Bed Bath & Beyond filed for bankruptcy in April after several attempts to revive it. Bankruptcy usually means that the company’s stock is done. Investors just have to lick their wounds, but not this time. Bed Bath & Beyond’s reign as copycat turned the company into something of a stock market celebrity. Despite the bankruptcy filing containing clear warnings that stockholders may be left with nothing, shareholders are not giving up hope. Even months later, Bed Bath & Beyond’s most loyal supporters refused to give up.
But here’s where things get really weird: These investors turned their attention to a children’s book called teddy bear find the answers. teddy bear, written by Ryan Cohen, founder of the pet care website Chewy and a former investor in Bed Bath & Beyond, became the Rosetta Board of these investors. They believed it was the key to understanding the complex conspiracy they envisioned, one in which Wall Street bad guys were sinking stocks and a hero (Cohen, in their eyes) emerged to save them. As they studied the pages, they found clues hidden in the tiniest of details, such as the color of Teddy’s shirt, which reflected the seller’s logo.
Their theory? Cohen planned a comeback to not only save Bed Bath & Beyond, but also to compensate loyal investors by offering them shares in a brand new company called Teddy.
In comparison, the retailer’s fate was simple. Overstock.com bought the website, mobile app and name for $21.5 million (stores and merchandise were excluded from the sale) and renamed itself Bed Bath & Beyond. Not Teddy.
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