You'd have to be crazy to give away stock as part of a kickstarter campaign. Even it were possible I can't imagine many project creators making that choice. The numbers just don't make sense. Especially given how successful kickstarter has been without it.
Following your logic: "You'd have to be crazy to give away stock as part of an investment round. Even it were possible I can't imagine many project creators making that choice. The numbers just don't make sense. Especially given how successful kickstarter has been without it."
Let's say your a 2-4 man startup of industry professionals with a game prototype and a great trailer. You have the potential to bring in upwards of $1,000,000 on Kickstarter. That money is pretty much equivalent to pre-orders plus varying levels of "special edition" perks and physical goods.
How much equity would you put on the table and how much money would you want for it? Keep in mind that if you have a good pitch you can bring in $1,000,000 for no equity and if your game is successful it could bring in another $3,000,000 to $10,000,000.
But if customers have the option to choose between investing or preordering, it will probably get a lot harder for preorder only kickstarters to raise money.
Those are some very generous numbers you have there! Of course, there are examples of successful KS campaigns but it's not exactly a sure thing.
Also, it requires that you have a (typically consumer) product that you can pre-sell. What if you are making a Saas that could turn into a profitable business but that cannot be launched on Kickstarter? It might still be a good investment opportunity so the other model could work.
YC funds $120k for 7%. But the majority of the value in being a YC startup isn't the cash. Cash is a much bigger portion of the Kickstarter value proposition but it also provides value as a marketing tool and in establishing a hardcore fan base.
I wonder what fair numbers would be. Hrm. Hard to say. A lot of 1-4 man small teams would do it on second thought. I think $100k for 10% is a pretty crap deal but creators would probably take that offer. Hard to know how Joe Public would respond. Definitely hard to predict after 5 years when people compile lists of games that even gave a break even return. Game companies and software startups don't exactly have a high success rate.
Now that we've established it could make sense, tweak the numbers to an equilibrium. Unless you've calculated that equilibrium, found it unworkable and skipped that step in the conversation and would like to enlighten us!
This whole "controversy" over companies who do Kickstarters and later raise money (or sell their company) seems overblown. When you're backing a Kickstarter for these types of companies you're often trying to get the product as a pre-order. So in addition to a potentially low margin business, these companies are now supposed to feel inclined to give you -- the customer -- equity in their company? As a backer, do you want the product or do you want the equity? They are two completely different ideas that seem to be conflated in the press. Perhaps all this controversy is fabricated by the press and not an actual problem.
Kickstarter in particular is about rewards and/or patronage. There is an avenue for equity based crowdfunding elsewhere, the question is whether there is a big enough demand on the consumer side (with people who have little information about the company) and the business side (with founders who don't want to share equity). I'm not referencing AngelList, but rather companies who would run Kickstarter-like projects.
I guess because kickstarter is a bit of both. Even when you are "purchasing" or pre-ordering a product, you don't have anywhere near a 100% chance of getting it delivered... you really are taking the risk of investing. Not sure what the solution really is though.
If everyone called it pre-ordering and not crowdfunding, I think there would be less "controversy"/ upset people. (I realize the crowd might be providing the funding to make whatever endeavor possible, but if it's ultimately pre-ordering...) the conceptual framework of crowdfunding means you're a part of something bigger. It taps into the language of start up funding. If a successful campaign results in the people putting on the project making tons of money, all you might get is a refund and disappointment. That result is more palatable if all you did was pre-order something.
Honestly, I don't think it's going to work because a small number of people are always going to try to cheat the system and end up ruining the whole thing.
That's pretty much every system in the world. You could say that about credit cards, tax returns, democracy, road rules, marriage... etc. They need to set up a framework that minimises opportunity for cheats and accept there is risk in everything.
security fraud is much lower and SEC is successful at enforcing cheaters. We need this level of regulation for kickstarter with equity to be successful, otherwise we are going to see innocent people getting duped easily and slip away without facing any restitution.
I just don't see this happening without support from government regulatory body and without it, the result would be disastrous.
>Had the backers received company stock instead of company T-shirts, they would have seen close to a 1,000 percent ROI.
This assumes Oculus would have sold 100% of its shares at a $2 million valuation, and then still sold again for $2B after the developers had cashed out.
I could go to vegas and drop $40k in cash on the casinos, gambling it all away. There's nothing to stop me from dong that.
But even with 20 years experience in startups, I can't put $40k into a startup's round?
Slate would say I need to be "protected" from that?
Sorry, in this case, the regulations that only allow the well connected and wealthy to invest in startups also serve to keep those with domain expertise out of the market.
All too often regulations are used to exclude competition. This is one example.
The difference between a casino and a startup is that you're legally guaranteed to know all the rules of the casino. "Here is the game; here's how it's played; here are your odds."
With a startup, information asymmetry virtually guarantees that crowds are least qualified to judge whether it will succeed. It's easy to trick people, and that's what the legislation is protecting against.
The difference between a casino and a startup is that you're legally guaranteed to know all the rules of the casino. "Here is the game; here's how it's played; here are your odds."
Not quite. That's certainly true for roulette, and maybe craps, but only marginally true for poker, blackjack, pai gow, etc (although those odds are researchable). For machine gambling, the odds are dynamic, and the casino is allowed to non-transparently manipulate them.
I'm not an expert, but I'm pretty sure when you set foot at a blackjack table at a US casino, there is almost 100% likelihood that you're going to be playing blackjack. This outcome was engineered by the legal system. It's no accident that there's no chance of you losing your money at a casino for reasons you couldn't have researched ahead of time. In other words, the rules of the game are public knowledge.
With a startup, you could lose your money because the founders got into a squabble.
Casino vs startup investing is therefore an invalid comparison.
There are lots of people who play blackjack in casinos who don't know the odds, or who at least fool themselves into thinking that the odds are in their favor.
It's harder to estimate with startup investing in the case where you do your homework on both, but I think that if startup investing is heavily advertised as being a complete crapshoot with potentially huge returns, but most likely a complete loss, then people should be allowed to experiment with it. The proposed rules have spending limits to enforce that it's just dipping in, and not people dumping their life savings into things.
Very few people would go to a casino with their life savings with the expectation of retiring off the winnings. Most people understand the risks involved (even if they are very poor at understanding the real odds, they still know they aren't good). Further, casinos would never be allowed to sell their games that way; gambling is a massively regulated industry.
Now consider a company selling itself. With no rules, they are able to say anything they want about themselves. The stock market is seen by many (most?) as an investment, and therefore fairly safe (possibly even safe). How well dispersed is the knowledge that, while investing most of your money in the market is relatively safe, investing it in one dstock is horribly risky? How easy is it for a semi-reputable (much less disreputable) company to paint an overly rosey picture, appealing to somebody's hopes and dreams?
I completely agree you should be able to invest. There is a real problem with how qualified investor is defined today, but I'm not convinced removing that concept is a good idea at all.
> The stock market is seen by many (most?) as an investment, and therefore fairly safe (possibly even safe).
Well, now, that seems to be what needs to change. Institutional investors rightfully treat non-AAA investment products with all the respect of used toilet-paper (with the mortgage crisis imparting the further wisdom that a AAA rating is a necessary, but not sufficient condition for a product to be a safe backing investment for consumer savings.) How can we get consumer investors to see things the same way? Put big black bars across the tops of stock certificates like they have on packs of cigarettes?
"Now consider a company selling itself. With no rules, they are able to say anything they want about themselves. The stock market is seen by many (most?) as an investment, and therefore fairly safe (possibly even safe). How well dispersed is the knowledge that, while investing most of your money in the market is relatively safe, investing it in one dstock is horribly risky? How easy is it for a semi-reputable (much less disreputable) company to paint an overly rosey picture, appealing to somebody's hopes and dreams?"
I don't know where you extract that there are "no rules" in crownfunding stock. The stock market is crownfunding by nature. At first NY Stock market was a tree under which interested people traded part of their companies.
With more than one hundred kickstarter projects backed on my belt, I have been duped in... ZERO.
They are free to say whatever they want but it is very easy to catch a liar.
Part of my family comes from socialist East Europe economies. In those places even very smart people like nuclear scientists or very bright philosophers were protected "for their own good" against taking risks(or doing anything on their own by the way, good competent people were dangerous if they did good things because it made the very incompetent look bad).
The only problem is that "protectors" were very Mediocre people, people that spent their time banging pretty girls and drinking Vodka. Bureaucrats whose only merit were kissing asses of someone higher in the monopolistic hierarchy of power.
Let me be a grown up, an adult who takes his own decisions.
“We find it very hard to believe that any attractive companies will use” non-accredited investor crowdfunding
On any given day, there are millions of English-speaking people on the internet. If you can capture the hope and imagination of those people, they will give you money, and the total amount you receive will be significant. Alternatively, if you can convince a small number of them to give you a large sum of money (à la Occulus), your result will be the same. This, obviously, requires the right sort of idea; one that resonates with large numbers of people, or resonates so strongly with a small number of people that they're willing to part with hundreds of dollars. But it's quite possible, and I see no reason why a serious company wouldn't explore this possibility.
On the other hand, after reading some history about the concept of the stock market, I think legal protections aren't a bad thing. The goal is to protect uninformed consumers from predatory behavior. It's an important goal, because no one likes admitting they're uninformed (least of all to themselves) so you end up in a situation where people are throwing around their nest eggs at emotional appeals (companies who convince you that they can make your fantasy happen). It's easy for people to convince themselves they've stumbled onto a big opportunity, and it's rather easy for them to believe in it so strongly that they're willing to invest large sums of money; sums they sometimes can't afford. If their investment disappears, so does their ability to participate in the economy. The history of the idea of stocks is filled with this sort of behavior, and sometimes the consequences can be disastrous. Due to information asymmetry, those tempted to invest in a new phenomenon are usually the ones least qualified to judge whether the phenomenon will yield returns. Hence, predatory behavior, and the original motive for protective legislation.
There's a balance to be struck between taking advantage of small sums of money from millions of people, and protecting those people from dumping money they can't afford into a new phenomenon. Some tasteful regulation isn't necessarily a bad thing.
I completely agree. The refund rates of popular limited-time only specials, 10-20%, would suggest unsophisticated "investors" are willing to do desperate things including risk far more money than they can afford to lose, when an emotional appeal is powerfully made to them. This can very often lead to financial woes.
This is a very real problem.
However, I have an especially hard time believing the government can make Internet-based regulatory initiatives work at all. In the modern day, where what is right and what is wrong is increasingly fought for over social media, I have to wonder what the role of government will be. Saying we need regulation is a nice thought, but it's going to run up against some practical realities that make the current regulatory regime particularly ineffective.
For example, Counterparty [1] enables anyone, located anywhere in the world, to raise money from anyone else anonymously with Bitcoin. It's "pseudonymous", but come on. Is the SEC ready for that world? We are about to witness a completely unregulated global securities market take shape, and we have a government that can't make Healthcare.gov! The most interesting question to consider is how do we protect consumers in a new world where they will be faced with countless, potentially anonymous securities offerings from complete strangers, many of whom will be located overseas or engaged in gray area trades. Talk about a nightmare for slow-moving bureaucracies.
The same government that regulates the sale of stock is the one that ensures the company gives you the stock, voting, and dividends you are owed. If you buy unregulated securities with Bitcoin, what stops the seller from "vanishing" your securities overnight?
Cyther, it looks like you just made a new account. Since your comment was autokilled, I'm guessing you're posting through Tor. HN autokills comments from new accounts if they're made through Tor due to past abuses. If you email hn@ycombinator.com and include a link to this subthread then they'll mark your account as legit.
Your comment was good. The autokill was unrelated.
Indeed, the argument is self-refuting. People are willing to dump billions into crowd funding without any equity and with all the same risks. Moreover, a sizable percentage of crowd funders chose not to receive any "rewards" or to receive only trivial rewards (thank-yous, t-shirts, postcards, etc.) That shows a willingness to fund projects even when absolute no return is expected. The idea that people would not do the same and more when equity is involved is just blind ignorance of reality.
> From an investor’s perspective, crowdfunding operates most similarly to angel investment. But most crowdfunding investors won’t be able to act like successful angel investors. “Successful angel investors invest in industries they know well, do a lot of due diligence, spend time mentoring the companies they invest in, and diversify their investments,” said Dorff.
A single non-accredited investor may not invest as well as an experienced angel investor. But the idea is to invest with "the crowd". The funding sites will help with some of the due diligence, and people will gravitate to the most promising startups. Instead of providing advice individually, the crowdfunders will provide group feedback, marketing, etc. And they'll be able to diversify just like angels, since they'll invest smaller amounts in each startup.
How does crowdfunding successfully work in the UK, but not in the US? Having done startups in both environments, structurally, I don't see much of a difference.
AFAIK no. I know you're not refuting this, but my general point is that in the UK this system does exist and hasn't created the supposed chaos in the UK that the US financial authority believes will happen in the US.
From memory signing up for Crowdcube last year (a colleague asked me to review a business he's been referred to), I had to 'tick a box' declaring I was a sophisticated investor (not the right legal term - I think I'm inserting the Australian equivalent into my memory). I presume a slightly more thorough approval process would be involved if I made an investment.
So it's crowdfunding, but not in the "everybody can play" model the article discusses.
Interesting to see that this does not include a similar declaration for someone with expertise in the field that the investment opportunity is in. Still I guess it could be argued that even if the business is successful you could be hard done by if you don't understand the financial instruments involved as well as you should.
>The SEC estimates that it would cost $39,000 in fees to accountants, lawyers, and the funding portal to raise just $100,000, and more than $150,000 to raise $1 million. Those are insanely high capital costs—companies would be better off financing their operations with credit cards.
15% on money that never has to be paid back? If we're comparing to Kickstarter, fees are at least 8% and you are contractually obligated to supply a product.
>For comparison, underwriting fees for a large public offering are usually under 4 percent.
Why are we comparing this to a large public offering?
A lot of people dont realize that that you can begin trading stock OTC by just filling some paperwork with the SEC though lawyers fees for that paperwork are not cheap. You can do what is called direct public offering and directly sell your stock without using an exchange aka over the counter. Many people refer to these stocks as penny stocks and the OTC market as the pink sheets. What these new laws are trying to change is the way you register to sell OTC and the people you are allowed to sell to. The real problem is that just like no one trusts penny stocks and the otc market no one is going to trust crowdfunded stocks. They are going to be full of scams and pump and dump schems. Just look at the movie wolf of wall street for an example of the kind of scheming that goes on in the otc markets
Let's get one thing straight - the SEC "worrying" about fraudulent behavior in crowd-based equity is laughable.
Yes, fraud can happen in crowd-based equity - that's not what I'm talking about though.
What is laughable is that the one thing the SEC is supposed to monitor (the stock market) is the single biggest fraud perpetuated on the American people. It is where young, naive people like myself put their life savings only to have it crushed by people who were richer than me, who could generate volume on whim, perform insider trading while not worrying about the consequences, and take bailouts from a government that milks the rest of the population for taxes. I'll honestly be damned if the SEC isn't in the pocket of those who would benefit from it.
(I don't always agree with Mark Cuban, but most of what he says here seems pretty sensible).
As far as investing goes, I always seemed to be pretty "good" - or at least, lucky. It was not unusual for me to make a few thousand dollars in a week (and occasionally lose a little). I typically never invested in very risky prospects, always things that I knew would be around for quite a while like Google and Apple.
I made the foolish mistake of investing in Freddie Mac and Fannie Mae, companies that were once labeled "too big to fail" (and now trade OTC, if at all - have not checked since they became junk). Actually, my "mistake" appeared to be a brilliant move at first, as I made $30,000 in a few hours. But in a few more hours, that number was negative. However, I was not investing out of speculation, I invested because I thought that these companies were going to survive the recession - in fact, because of a statement from Hank Paulson (then Secretary of Treasury) who said that the government would not be taking over these entities (they were GSEs, but publicly traded). Hours later rumors turned against this, and within weeks it was trading at $0.25 or less (down from $7 to $11 a share where I originally was trading it at).
50 comments
[ 2.1 ms ] story [ 188 ms ] threadHow much equity would you put on the table and how much money would you want for it? Keep in mind that if you have a good pitch you can bring in $1,000,000 for no equity and if your game is successful it could bring in another $3,000,000 to $10,000,000.
Also, it requires that you have a (typically consumer) product that you can pre-sell. What if you are making a Saas that could turn into a profitable business but that cannot be launched on Kickstarter? It might still be a good investment opportunity so the other model could work.
I wonder what fair numbers would be. Hrm. Hard to say. A lot of 1-4 man small teams would do it on second thought. I think $100k for 10% is a pretty crap deal but creators would probably take that offer. Hard to know how Joe Public would respond. Definitely hard to predict after 5 years when people compile lists of games that even gave a break even return. Game companies and software startups don't exactly have a high success rate.
"0.000001% ownership per $10000 you invest"
"Sure, LOL, why not"
Now that we've established it could make sense, tweak the numbers to an equilibrium. Unless you've calculated that equilibrium, found it unworkable and skipped that step in the conversation and would like to enlighten us!
Kickstarter in particular is about rewards and/or patronage. There is an avenue for equity based crowdfunding elsewhere, the question is whether there is a big enough demand on the consumer side (with people who have little information about the company) and the business side (with founders who don't want to share equity). I'm not referencing AngelList, but rather companies who would run Kickstarter-like projects.
Edit: spelling
I just don't see this happening without support from government regulatory body and without it, the result would be disastrous.
This assumes Oculus would have sold 100% of its shares at a $2 million valuation, and then still sold again for $2B after the developers had cashed out.
It's a nonsense comparison.
But even with 20 years experience in startups, I can't put $40k into a startup's round?
Slate would say I need to be "protected" from that?
Sorry, in this case, the regulations that only allow the well connected and wealthy to invest in startups also serve to keep those with domain expertise out of the market.
All too often regulations are used to exclude competition. This is one example.
With a startup, information asymmetry virtually guarantees that crowds are least qualified to judge whether it will succeed. It's easy to trick people, and that's what the legislation is protecting against.
Not quite. That's certainly true for roulette, and maybe craps, but only marginally true for poker, blackjack, pai gow, etc (although those odds are researchable). For machine gambling, the odds are dynamic, and the casino is allowed to non-transparently manipulate them.
With a startup, you could lose your money because the founders got into a squabble.
Casino vs startup investing is therefore an invalid comparison.
It's harder to estimate with startup investing in the case where you do your homework on both, but I think that if startup investing is heavily advertised as being a complete crapshoot with potentially huge returns, but most likely a complete loss, then people should be allowed to experiment with it. The proposed rules have spending limits to enforce that it's just dipping in, and not people dumping their life savings into things.
For machine gambling, the odds are dynamic, and the casino is allowed to non-transparently manipulate them.
Now consider a company selling itself. With no rules, they are able to say anything they want about themselves. The stock market is seen by many (most?) as an investment, and therefore fairly safe (possibly even safe). How well dispersed is the knowledge that, while investing most of your money in the market is relatively safe, investing it in one dstock is horribly risky? How easy is it for a semi-reputable (much less disreputable) company to paint an overly rosey picture, appealing to somebody's hopes and dreams?
I completely agree you should be able to invest. There is a real problem with how qualified investor is defined today, but I'm not convinced removing that concept is a good idea at all.
Well, now, that seems to be what needs to change. Institutional investors rightfully treat non-AAA investment products with all the respect of used toilet-paper (with the mortgage crisis imparting the further wisdom that a AAA rating is a necessary, but not sufficient condition for a product to be a safe backing investment for consumer savings.) How can we get consumer investors to see things the same way? Put big black bars across the tops of stock certificates like they have on packs of cigarettes?
I don't know where you extract that there are "no rules" in crownfunding stock. The stock market is crownfunding by nature. At first NY Stock market was a tree under which interested people traded part of their companies.
With more than one hundred kickstarter projects backed on my belt, I have been duped in... ZERO.
They are free to say whatever they want but it is very easy to catch a liar.
Part of my family comes from socialist East Europe economies. In those places even very smart people like nuclear scientists or very bright philosophers were protected "for their own good" against taking risks(or doing anything on their own by the way, good competent people were dangerous if they did good things because it made the very incompetent look bad).
The only problem is that "protectors" were very Mediocre people, people that spent their time banging pretty girls and drinking Vodka. Bureaucrats whose only merit were kissing asses of someone higher in the monopolistic hierarchy of power.
Let me be a grown up, an adult who takes his own decisions.
On any given day, there are millions of English-speaking people on the internet. If you can capture the hope and imagination of those people, they will give you money, and the total amount you receive will be significant. Alternatively, if you can convince a small number of them to give you a large sum of money (à la Occulus), your result will be the same. This, obviously, requires the right sort of idea; one that resonates with large numbers of people, or resonates so strongly with a small number of people that they're willing to part with hundreds of dollars. But it's quite possible, and I see no reason why a serious company wouldn't explore this possibility.
On the other hand, after reading some history about the concept of the stock market, I think legal protections aren't a bad thing. The goal is to protect uninformed consumers from predatory behavior. It's an important goal, because no one likes admitting they're uninformed (least of all to themselves) so you end up in a situation where people are throwing around their nest eggs at emotional appeals (companies who convince you that they can make your fantasy happen). It's easy for people to convince themselves they've stumbled onto a big opportunity, and it's rather easy for them to believe in it so strongly that they're willing to invest large sums of money; sums they sometimes can't afford. If their investment disappears, so does their ability to participate in the economy. The history of the idea of stocks is filled with this sort of behavior, and sometimes the consequences can be disastrous. Due to information asymmetry, those tempted to invest in a new phenomenon are usually the ones least qualified to judge whether the phenomenon will yield returns. Hence, predatory behavior, and the original motive for protective legislation.
There's a balance to be struck between taking advantage of small sums of money from millions of people, and protecting those people from dumping money they can't afford into a new phenomenon. Some tasteful regulation isn't necessarily a bad thing.
This is a very real problem.
However, I have an especially hard time believing the government can make Internet-based regulatory initiatives work at all. In the modern day, where what is right and what is wrong is increasingly fought for over social media, I have to wonder what the role of government will be. Saying we need regulation is a nice thought, but it's going to run up against some practical realities that make the current regulatory regime particularly ineffective.
For example, Counterparty [1] enables anyone, located anywhere in the world, to raise money from anyone else anonymously with Bitcoin. It's "pseudonymous", but come on. Is the SEC ready for that world? We are about to witness a completely unregulated global securities market take shape, and we have a government that can't make Healthcare.gov! The most interesting question to consider is how do we protect consumers in a new world where they will be faced with countless, potentially anonymous securities offerings from complete strangers, many of whom will be located overseas or engaged in gray area trades. Talk about a nightmare for slow-moving bureaucracies.
1: https://counterparty.co
Your comment was good. The autokill was unrelated.
A single non-accredited investor may not invest as well as an experienced angel investor. But the idea is to invest with "the crowd". The funding sites will help with some of the due diligence, and people will gravitate to the most promising startups. Instead of providing advice individually, the crowdfunders will provide group feedback, marketing, etc. And they'll be able to diversify just like angels, since they'll invest smaller amounts in each startup.
UK crowdfunding websites for reference:
https://www.seedrs.com/
http://www.crowdcube.com/
So it's crowdfunding, but not in the "everybody can play" model the article discusses.
http://www.seedrs.com/faq/items/65_what_are_the_eligibility_...
http://www.legislation.gov.uk/uksi/2005/1529/schedule/5/made
15% on money that never has to be paid back? If we're comparing to Kickstarter, fees are at least 8% and you are contractually obligated to supply a product.
>For comparison, underwriting fees for a large public offering are usually under 4 percent.
Why are we comparing this to a large public offering?
Yes, fraud can happen in crowd-based equity - that's not what I'm talking about though.
What is laughable is that the one thing the SEC is supposed to monitor (the stock market) is the single biggest fraud perpetuated on the American people. It is where young, naive people like myself put their life savings only to have it crushed by people who were richer than me, who could generate volume on whim, perform insider trading while not worrying about the consequences, and take bailouts from a government that milks the rest of the population for taxes. I'll honestly be damned if the SEC isn't in the pocket of those who would benefit from it.
http://blogmaverick.com/2010/08/20/the-stock-market-is-still...
and here:
http://blogmaverick.com/2008/09/08/talking-stocks-and-money/
(I don't always agree with Mark Cuban, but most of what he says here seems pretty sensible).
As far as investing goes, I always seemed to be pretty "good" - or at least, lucky. It was not unusual for me to make a few thousand dollars in a week (and occasionally lose a little). I typically never invested in very risky prospects, always things that I knew would be around for quite a while like Google and Apple.
I made the foolish mistake of investing in Freddie Mac and Fannie Mae, companies that were once labeled "too big to fail" (and now trade OTC, if at all - have not checked since they became junk). Actually, my "mistake" appeared to be a brilliant move at first, as I made $30,000 in a few hours. But in a few more hours, that number was negative. However, I was not investing out of speculation, I invested because I thought that these companies were going to survive the recession - in fact, because of a statement from Hank Paulson (then Secretary of Treasury) who said that the government would not be taking over these entities (they were GSEs, but publicly traded). Hours later rumors turned against this, and within weeks it was trading at $0.25 or less (down from $7 to $11 a share where I originally was trading it at).
But it gets better - little did I know (at the time) that Paulson was a Goldman Sachs alum: http://www.nytimes.com/2008/10/19/business/19gold.html?pagew...
And that he gave advance word of their failure. Some people might call that insider trading, but, what do I know? :)
http://www.bloomberg.com/news/2011-11-29/how-henry-paulson-g...