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!