$24.45
Happier
By Duru
January 5,
2005
It was almost
like a dream come true. A bright, shiny envelope was lumped in the pile of mail
that had collected over the holidays while I was away traveling and forgetting
about the world. This cheery envelope read "Lucent Technologies Securities
Litigation Settlement Fund." I could not believe it - my very first
settlement from the ugly days of the bubble bursting. Suddenly, it seemed
revenge was close at hand. I tore into the envelope to see how many hundreds,
even thousands, of dollars I had recovered from my losses owning Lucent stock as the company swindled hapless investors into
holding their shares. Just as quickly as my vengeance boiled and my hopes
ballooned, they burst into a fit of tears of laughter. In its infinite wisdom,
the court had decided that $24.45 would properly compensate me for all my pain,
suffering, and economic loss from believing in the bubble one too many
quarters. I hope the lawyers got at least double my take for all their hard
work!
OK. So I am
being melodramatic as usual, but this is my chance to tell someone and release
my indignation. That's what I love about having my own site, right?
While I have
joined my share of securities litigations in the hopes of getting something
back, I never really had any concept of just how much (or little) these lawyers
were really talking about. Now I know. But even more importantly, this
particular settlement brought back memories of the moment reality first began
to sink into my thick skull. I will list the chain of events. Don't worry, it is OK to laugh….as long as you promise never to
tell anyone.
1.
I believe it was
late 1999. I had clocked some nice gains dabbling in recent IPOs and various
tech stocks. Given that I now figured I knew what I was doing, I coolly dropped
a wad of cash on Lucent stock after it had run fast
and furious. I of course expected the stock to continue the run to infinity.
2.
No more than a
week later, Lucent announces its first of many
earnings shortfalls. Yep - I bought my Lucent shares
almost at the exact top - I think around $60 or $70 a share.
3.
After seeing the
horrific drop in my Lucent shares, I looked for the
news, and asked: "Earnings? What's an earnings announcement? And why did
Lucent have to warn about these earnings before the official
announcement?"
4.
I looked more
into this mysterious thing called an earnings announcement. Wow! You mean
companies have to report on earnings every quarter? That seems like a lot.
What's the point?
5.
Seemed to me the
point was to continue to remind shareholders that they are big suckers. No
matter. I am in this for the long-term, and I figured this thing called an
earnings disappointment is a temporary blip. Every big sell-off was an
opportunity for more Lucent bargain shopping. After all, Lucent was the
blue-chip of the blue-chips of telecoms! I of course made sure to track down
news to validate this assessment. I think a lot of it came from Motley Fool and
major Wall Street analysts.
6.
I cannot
remember how many more temporary earnings bumps occurred before the big shoe
dropped. The day time froze, and we loyal long-term investors discovered that
the CEO had been part of a scheme to fake financials. The SEC was after my
precious investment, and in no time flat (a little
over a year to be exact) I was looking at single digits on my share price. In
retrospect, the slight irony here is that I never bought Lucent for those fake
financials. I bought because the stock had been going up so far for so long -
what else could it do but keep going up after I joined the bandwagon!?
7.
By this time, I
had seen plenty of disasters blow up all around me. I think I was so
shell-shocked by the time Lucent finally came clean that I almost missed all
the solicitations for this thing called a class action lawsuit (securities
litigation).
8.
In complete
anger and frustration, I signed up to start what essentially was a three or
four year process to get my $24.45 restitution. I am now all the happier for
it.
Needless to
say, I learned a whole bunch of lessons from this experience and others from
the bubble's bursting. As many of my faithful readers know, I started writing
all these missives in the hopes I could prevent others from learning the hard
way.
I will close
by noting that emotions played a large part in the action I described above. It
is only after you have wrestled with the markets a bit do you learn to take
charge of those emotions and prevent them from leading you down destructive
paths (unless you are just born cold and calculating!). As I stoically examine
my newfound riches, I think an investment in some facial tissues
are in order. I have a lot of tears of joy to dry. What ever will I do
with all my other settlement monies…if they ever come!?
Be careful out
there!