Once upon a time, a troop of monkeys lived near a village. The villagers in this village were hardworking and sincere, but also quaint and simple.
One day, a rich merchant came to this snoozy village.
The curious villagers gathered around to see this stranger. The merchant coming forward pompously declared, “I shall buy these village monkeys for $100 each”. The villagers thought this merchant was crazy and they couldn’t fathom why someone would buy stray monkeys for $100 apiece!
Still, excited at the prospect of making some easy money, few villagers caught some monkeys and gave it to this merchant. To their astonishment, he gave them the $100 as promised for each monkey.
This news spread like wildfire, and people started catching these poor monkeys to sell them to this merchant.
A few days later, happy with the response he had received, the merchant decided to double the price of each monkey to $200 each.
Excited and frenzied, the villagers ran around, days on end to catch the remaining monkeys, and sold them to the merchant for $200 each. The merchant, who by now was mighty pleased with the response, announced, he would now buy the monkeys at $500 each! The villagers lost sleep; they caught the last six or seven remaining monkeys and gave them to the merchant for $500 each and now anxiously waited for his next move.
The merchant later came and announced, he was going home for a week and upon his return, would buy more monkeys at $1000 each!
He asked his servants to take care of the monkeys he had bought, then bidding his farewell, left the village for good. Villagers, who by now were rich and accustomed to the easy money, became anxious and sad as there were no monkeys left for them to sell and make more money.
Then one day, the servants of the merchant told some villagers, that they were willing to sell a few of the monkeys at $750 each secretly, before the merchant came back.
This news again became viral and spread like wildfire.
Since the merchant was going to buy the monkey’s back at $1000 each, there was more profit to be made.
Villagers pooled in all they had saved so far and even raised more capital to buy the monkeys.
The rich bought monkeys in bulk, the poor borrowed money from others to buy as many as they could afford.
They made a queue at the merchant’s house the next day, to get their dear monkeys back.
The servants sold all the monkeys at $750 each, within a day.
After the successful sale of Monkey’s to the villagers, the servants too left the village, informing them, they would return with their master and asked them to take good care of their monkeys in their absence.
The villagers took excellent care of their monkeys and waited patiently for the merchant to return.
Weeks turned into months, but nobody came!
It slowly dawned upon the villagers that they had invested all their savings to buy useless stray monkeys at $750 each! The Merchant and his servants were now gone forever with their money and all they were left with were “Big Fat Monkeys”.
This story teaches us a lot about how some big IPO’s and Ponzi schemes work.
- The Merchants are the promoters of the company, who list on the stock markets, to attract your capital, in the promise of lucrative returns. Making tall promises, inflating the share price, and creating people frenzy is all part of the scheme.
- The servants are the bankers, who sell these company shares to the gullible investors at high prices, and end up trapping them with the promise of high returns.
- Villagers are you and me, who invest in these companies with the fear of missing out, without actually knowing what the company does, and are purely lured by the offer of high returns and easy money.
- The Monkeys are the useless stocks that we are left with when the company folds up. They are not even worth their weight on paper.
It’s true what they say about the stock market.
“ It made many more bankrupt and very few filthy rich, this monkey business”
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