History’s greatest financial fools

They say that a fool and his money are soon parted.

To mark this year’s April Fools Day, AAT (Association of Accounting Technicians) has researched memorable moments from history where individuals and companies have made a great financial mistake, either through failing to capitalise on a great investment opportunity, or through taking one that spectacularly backfired.

Three foolish buying decisions

1. AOL – Back in 2000, the dot com bubble was booming and AOL bought rival Time Warner for around £127 billion. Just nine years later, Time Warner was again separated from AOL at a market value of just £25 billion, with AOL itself worth just £1.7 billion.

2. Scotland – Way back at the end of the 17th Century, the Scots attempted to establish the Company of Scotland Trading to Africa and the Indies, gaining public contributions of £400,000 (£54 million in today’s money) to support their growth as a European power. However, the company never gained access to European financiers or secured trade agreements with England, the project flopped and the money was wasted.

3. Martin Shkreli – The pharmaceutical executive bought the only copy ever made of Wu-Tang Clan’s 2014 album Once Upon a Time in Shaolin, for around £1 million. This may not sound like a huge waste of money for a super fan but, according to Bloomberg, he hasn’t even listened to it yet.

Three foolish selling decisions

1. Leeds United – Then champions of England, Leeds offloaded talisman Eric Cantona to their Premier League rivals Manchester United for a fee of about just £1 million. Cantona inspired Manchester United to four Premier League crowns over the next five years – the first of which was their first championship in 26 years – while Leeds have not come close to winning the title since.

2. Ron Wayne – One of the three original founders of Apple, Wayne relinquished his 10 per cent stake in the company for £550, just two weeks after the company had started trading. Those shares would be worth over £24 billion as of 2013.

3. Russia – Way back in 1867, the Russian Empire received £5 million for its sale of Alaska to the United States, comprising of some 1.5 million square kilometres of land. Given the losses of oil, manpower and even cabbage that Russia would have otherwise benefitted from, even the Moscow Times has recently bemoaned the loss of such a profitable area.

Three fools who should have taken the plunge

1. Shaquille O’Neal – The great American basketball player was approached by Starbucks CEO Howard Schultz about launching a number of Starbucks stores in black communities. O’Neal responded by saying that he had “never seen a black person drink coffee.” Schultz turned to fellow basketball star Magic Johnson instead, who sold his 105 franchises back to Starbucks in 2010 for nearly £50 million.

2. Decca Records – The leading record agency passed up on the opportunity to sign The Beatles on New Year’s Day 1962 after the band travelled to London to audition. They signed local act Brian Poole and the Tremeloes instead, claiming that “guitar groups are on their way out.”

3. Multiple publishing companies – It took the eight year old daughter of an editor at Bloomsbury to convince the company to publish Harry Potter and the Philosopher’s Stone, after the book had received 12 rejection letters in a row. Even then, the editor advised author JK Rowling to get a day job as she had little chance of making any money from the book. The Harry Potter series has combined sales in excess of 450 million on both sides of the Atlantic.

Adam Harwood is AAT's Media Relations Manager.