Investing News and Trends Quick Takes

Porsche’s IPO, NJ Deli Investing Scam, and Wells Fargo Company Stock Debacle

Well, we’ve been talking about the mayhem that's going on in the economic environment on a global basis right now. And in the middle of all this, you're looking for investment opportunities. Well, in the midst of all this, Porsche just went public. They created 911 million shares. 911, get it? Deference to the famous 911 sports car. The stock sold at the high end of their range, and they only sold 114 million of those shares. No voting rights and the price of the stock fell 7% after the initial public offering. This is not uncommon, so it was not unusual for the Porsche IPO to be a disaster.

Nine out of 10 companies that went public last year are now trading below their offering prices. This is why you really need to stay away from IPOs. They are not good investment opportunities.

How Can A Delicatessen Suddenly Be Worth $100 Million?

By the way, remember that New Jersey sandwich shop, the one that went public, and was suddenly worth $100 million? A deli. Federal agents now say the deli was at the center of an international conspiracy that defrauded investors. The FBI has arrested Peter Coker, age 80, James Patten, age 63, on securities fraud charges. Coker's son, Peter Jr., 53 years of age, is also facing charges, but he's still at large. They have not arrested him yet. The deli's share price went from a dollar in October 2019 to $14 in 18 months. $1 to 14 X increase. Yeah, it had never had more than $40,000 in annual revenue.

Prosecutors say that the price skyrocketed after Coker and Patten coordinated trades to make it look like there was real investor activity. Now it was all a scam. Some people, though, fell for it, including endowment funds of Duke University and Vanderbilt. It was nothing more than a pump and dump scheme and the deli owner himself, he was not involved in the scam, but the guys who were involved are now facing up to 20 years in prison.

Wells Fargo Stock Buyback Results in $13 Million Fine

So forget IPOs, forget these hot stocks. Just stick with your 401(k), right. Well, it's bad enough that you're buying company stock in your 401(k). That's a big no no. But what happened to employees at Wells Fargo is even worse. It turns out that when the 401(k) plan at Wells Fargo bought shares of Wells Fargo, the plan paid $145 million more for Wells Fargo stock than the stock was worth. Wells Fargo is now being forced to pay the money back, plus a $13 million penalty. So even in a 401(k) environment, you've got to make sure you're doing it right. And that means not buying company stock.