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The Worst Trades In History

Courtesy of ZeroHedge. View original post here.

Authored by Alex Kimani via SafeHaven.com,

To err is human--it's a fact of life that people make mistakes, all the time. Fortunately for the majority of us, our biggest mistakes on the job end up being quite tolerable and good learning experiences. But in the much bigger corporate arena where multi-billion-dollar deals are par for the course, blunders can be exceedingly costly whether they involve striking regrettable deals or passing up great opportunities.

A recurring theme of hubris tends to underline many corporate gaffes though some are plainly due to poor judgement.

Without further ado, the brass tucks. Here are the top 5 corporate blunders in history:

They say never to despise small beginnings. Well, that's exactly what former search giant Excite is guilty of. Back in 1999, Excite was the second-largest search engine behind only Yahoo, while Google was a little-known upstart.

Google's founders, Larry Page and Sergey Brin, then offered to sell the startup to Excite for $1 million at first, an offer that Excite turned down. They then lowballed the offer to $750,000, a screaming bargain in hindsight, yet Excite still passed up.

Several reasons have been advanced to explain Excite's strange decision. But we all know it turned out to be one of the biggest lost opportunities considering how Google has grown to become the world's largest search company, with assets worth about $210 billion and an enterprise value of $620 billion. Ouch.

When ailing subprime lender, Countrywide Savings, offered itself for sale to Bank of America for $4.1 billion in 2008, BofA CEO Ken Lewis thought it was a 'rare opportunity' too good to pass up. What he did not know was that he was getting the short end of the stick.

The most recent financial crisis was beginning to take shape, and the deal would end up saddling the giant bank with $40 billion in fines and settlements, BofA shares losing $500 billion in the market as well as costing Lewis his job. Countrywide CEO Angelo Mozilo got off a lot more lightly, managing to keep most of his $83 million paycheck for the deal after a couple of out of court settlements.

The dotcom crash of 2000-2002 wiped off $5 trillion in market value of tech companies in one of the worst episodes of capital destruction--and both Time Warner and AOL know all about it.

In 2001, Time Warner, a media powerhouse that was captivating the world with shows like The Sopranos and Sex and the City, together with America Online, the dominant provider of dial-up internet to millions of Americans, decided it was time for a tie-up.

On paper, the merger looked like a marriage made in heaven, with Time Warner getting its hands on AOL's 25 million subscribers, while AOL would benefit from its partner’s extensive cable network and rich content.

So a deal was struck, AOL happily paying $162 billion for Time Warner's assets. But the promised synergies never materialized. By late 2002, the value of the combined entity had cratered from $260 to a measly $20 billion in the worst M&A deal in corporate history.

Baby boomers are probably as closely acquainted with Blockbuster Video as millennials are with Netflix. In 2000, Blockbuster was the biggest name in video rental stores when Netflix, a 2-year old mail DVD startup, offered to sell its in-store business to Blockbuster for $50 million.

According to Netflix's CFO Barry McCarthy, Blockbuster's executives literally laughed Netflix's officials out of the building, a move they probably rue up to this day.

Ten years later, Blockbuster went belly up, killed by none other than Netflix's internet video streaming business while Netflix has gone on to become a $140 billion (enterprise value) giant. Meanwhile, the rest of us wtih no affiliations to Blockbuster are probably glad things worked out the way they did.

Ever heard of the guy who, back in 2010, bought two pizzas for 10,000 Bitcoins? Well Laszlo Hanyecz, as he is called, just exchanged an asset that would have been worth a cool $9.2 million at current Bitcoin prices for two pizzas worth $25.

Hanyecz though has nothing on Ron Wayne, one of the three original founders of Apple Inc., who in 1976 sold his 10-percent stake in the company for $800.

If you are a stickler for detail, $800 in 1976 is worth $3,553.50 in 2018 after adjusting for inflation. Not too shabby, but nothing like the $90 billion that Wayne's stake would be worth today.

Wayne was convinced that co-founder Steve Jobs' reckless spending would drive the company to the ground. Well, Apple did nearly go bankrupt in the mid-1990s--in Job's absence. Ironically, Steve Job's return to the company in 1996 is credited with bringing it from the brink.


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