Shareholder Freebies
Gimmicks for shareholders a contraindicator of value?
Last year I joined Tiiker for two reasons:
- to scoop up freebies and
- to find short ideas among the freebie offerors.
Real Good Food (RGF) offered people money to buy their shares as well as credit in their (lame) company store. The gimmick: $11 Amazon (AMZN) gift card for registering for the site. A monthly delivery of RGF products. I wasn’t a massive fan but their enchiladas were okay.
I got a $500 Visa (V) card. And $200 in store credit. I bought a North Face (VFC) jacket with their branding then used a black sharpie to color over the logo:
This offer required buying 3,750 shares for $7,125 and holding them for a week. The payoff was pretty rich — about 10% return in five trading days — because it was made before the shares had lost over 70% of their value, so the intention was a lower percent return.
TL;DR on the gimmick: got $511 in cash and equivalents (I consider Amazon gift cards to be worth 100 cents on the $1 for me), $200 in credit that was put to a jacket worth $200 to me, and a regular delivery package worth another $10–20 per month. I also got a data point. As I wrote at the time,
The caveat is that the company could be worthless and that it is a strong contra that they have to bribe people to buy their stock… They can only borrow on onerous terms that call their survival into question. My intention is to be in and out quickly. Take the money and run. You can even consider shorting shares against the long then boxing them up after a week when your Visa arrives.
It is impossible to imagine Warren Buffett begging anyone to buy Berkshire (BRK.A) (BRK.B) with such an offer! We thought that the shares were probably ultimately worthless and that the offer was gimmicky. Since then they’ve stayed on their previous trajectory:
Hoo-hoo-hoo
Go on, take the money and run
Go on, take the money and run
Hoo-hoo-hoo
Go on, take the money and run
Go on, take the money and run
Hoo-hoo-hoo
- Steve Miller
