These sharks are only interested in separating investors and their cash.
As the hype for the forthcoming Facebook share sale – or Initial Public Offering to be technical – rachets up, analyst opinion is divided. Some say a $100bn price tag is a steal. After all, who knows what it will do in the future – there is talk of a Facebook phone, Facebook films and Facebook music.
Others say that valuation is a steal because you'll never see your money again. After all, who knows what some younger version of Mark Zuckerberg will come up with? It could be something no one else has thought of, with the potential to to shoot all the present social media out of the water.
Technology is fickle. Today's hot website is often the one you'll be embarrassed to be seen around tomorrow. But it is not nearly as brutal as another, more specialised, area - toys.
Here, fashion can move so fast that firms can be optimistic in October and finished by February, especially if they concentrate on one area. How many boys glue and paint plastic kits of Spitfires or HMS Victory these days? Do girls still collect pink ponies?
The town where the sharks are on the land
So when I am called by a “marketing company” to discuss investing in a toy company in Boca Raton, Florida, there is a double alert. It's a toy company with just one product and it's in Boca Raton. The Florida town – it's Spanish for Mouth [of the] Mouse – of some 90,000 people is well known for its links to crime.
According to Wikipedia, “in 2007 it was reported that there were nine known gangs operating in Boca Raton. Boca Raton has a connection to the Mafia. Although not known for violent crime, it is a popular hangout for many suspected Mafia members. According to a number of US Federal indictments, as of June 2004, the Gambino family continues to operate in Boca Raton.”
Wikipedia continues: “According to MessageLabs (an email security vendor), Boca Raton is the "spam capital of the world", being the source of a significant proportion of all spam generated worldwide, not surprising given the area's appeal, the personal fortunes of typical spammers, and the area's notorious past as a favorite of organized crime. According to the Miami Herald, the city has a long history of involvement in confidence tricks. Richard C. Breeden, former U.S. Securities and Exchange Commission chairman, once called the city "the only coastal city in Florida where there are more sharks on land than in the water". In the keynote address to a computer security conference on June 8, 2004, Bruce Sterling described the city as the "Capone-Chicago of cyber fraud".
“On July 22, 2004, Boca Raton resident Scott Levine was charged with the largest computer crime indictment in United States history. Federal prosecutors allege that Levine unlawfully accessed Acxiom, a database of consumer data, to steal detailed personal information of millions of people.”
"Investor Relations"
My first email from the toy company is signed “Investor Relations”. Now that would normally suggest that there are a lot of shareholders and a lot of shares – after all, almost every significant quoted UK company has an investor relations department. But I would expect a real investor relations department operative to have a name.
The email suggested I look at their websites. There was a lot of stuff on a toy (whose appeal I failed to understand) complete with testimonials signed by people who would be impossible to find – try Marilyn, North Carolina, for instance.
What was absent? Any financial details – the firm seemed to have an investor relations department, but no accounts or other material for investors to relate to.
A week or so later, a second email arrives from someone called David at Investor Relations. This says: “It has come to my attention that my staff has been sending you information on our company with your approval. I have recently given it a 5 Star rating. That’s the highest rating I give to a stock. This is the best recommendation in years. I have recently placed all of our clients into this recommendation. This would be a great way to open up an account with us. I am going to have my chief advisor call you and give you the details.”
Log on to the investor relations site of any big company and you find loads of information. But you won't find star ratings or mentions of opening accounts or being phoned by a so-called “chief advisor”. If the shares in the toy company exist at all, they are not traded or tradable.
If you are persuaded by the “chief advisor”, you will buy a piece of paper without knowing what assets back it or the company's sales, profits or losses, or how many shares are in issue or what the value of the company is.
That's a lot not to know.
Boca Raton is the mouth of the mouse. But if you get caught, it will be more like the jaws of one of those alligators in Florida's swampland.