Nortel Networks A Bankrupt Behemoth.
*This memory is a continuation of 'The World's Biggest Casino' memory.
So much water had flown under the bridge since that weekend at Hidden Valley back in the summer of 2000. Within a year I was divorced, living on my own in a condo and I was now investing in just my future. There was no longer anymore our future and it would only be my future that was all that mattered to me going forward.
Within a decade of my divorce, Nortel Networks just like my wife would become history. Millions of investors lost billions of dollars investing in the once Canadian behemoth of a company. The stock price had gone from just shy of its all-time high of $125 per share to crashing into bankruptcy. I rode the Nortel rollercoaster for a good solid decade right up until it crashed in June 2009. That was when Nortel announced it would not be emerging from bankruptcy protection and the company would begin to sell off assets, primarily all of its business units.
Nortel was officially done and it was not a pretty ride. The rollercoaster had run right off the rails just before it crashed. Nortel was rife with incompetent management, greed and fraud. The Nortel story is a complicated story, but it is one that every new investor should take the time to read.
I didn’t need to read the story because I fuck'n lived the story.
During the time while I was heavily invested in the tech giant, Nortel had three CEOs, John Roth, Frank Dunn and Mike Zafirovski. Four if you include the U.S Admiral Bill Owens. Mr. Owens doesn't really count since he was nothing but an interim fill in yes man after Frank Dunn was fired.
My contempt for those three CEOs has not subsided in the least over the years and I know that it never will. All three played major roles in plunging Nortel into the abyss. To this day, I can only hope that in some way they each feel the exact pain that they had inflicted on so many. If there are three individuals who deserve a boatload of karma, it would definitely be those three crooked Nortel CEOs.
All three walked away from the company with millions in severance packages and pensions. All the while lifetime employees were robbed of their severance and rightfully earned pensions. It was disgusting and disgraceful how employees worldwide and especially those in Nortel's home country of Canada were treated. Each of those three corrupt men played a vital role in destroying thousands of lives.
Within a decade of my divorce, Nortel Networks just like my wife would become history. Millions of investors lost billions of dollars investing in the once Canadian behemoth of a company. The stock price had gone from just shy of its all-time high of $125 per share to crashing into bankruptcy. I rode the Nortel rollercoaster for a good solid decade right up until it crashed in June 2009. That was when Nortel announced it would not be emerging from bankruptcy protection and the company would begin to sell off assets, primarily all of its business units.
Nortel was officially done and it was not a pretty ride. The rollercoaster had run right off the rails just before it crashed. Nortel was rife with incompetent management, greed and fraud. The Nortel story is a complicated story, but it is one that every new investor should take the time to read.
I didn’t need to read the story because I fuck'n lived the story.
During the time while I was heavily invested in the tech giant, Nortel had three CEOs, John Roth, Frank Dunn and Mike Zafirovski. Four if you include the U.S Admiral Bill Owens. Mr. Owens doesn't really count since he was nothing but an interim fill in yes man after Frank Dunn was fired.
My contempt for those three CEOs has not subsided in the least over the years and I know that it never will. All three played major roles in plunging Nortel into the abyss. To this day, I can only hope that in some way they each feel the exact pain that they had inflicted on so many. If there are three individuals who deserve a boatload of karma, it would definitely be those three crooked Nortel CEOs.
All three walked away from the company with millions in severance packages and pensions. All the while lifetime employees were robbed of their severance and rightfully earned pensions. It was disgusting and disgraceful how employees worldwide and especially those in Nortel's home country of Canada were treated. Each of those three corrupt men played a vital role in destroying thousands of lives.
Do not ever believe otherwise.
The Nortel story taught me two valuable and life altering lessons. One, to never count your chickens before they hatch. And two, to never put all your eggs in one basket. For me those two lessons would be learned much too late in the Nortel saga.
However they would indeed both be learned and I would learn them the hard way.
Simply put, I fell in love with the company Nortel Networks and all I ever saw were the dollar signs. All the while some analysts were warning that Nortel’s fall from grace was now on the not too distant horizon. However I like most investors ignored those analysts, preferring the advice from the analysts who were always trumping the company and saying what I wanted to hear. So rather than take a safe and cautious approach, I stupidly chose the herd mentality and I just continued to buy more and more Nortel stock. My main investing goal was always to get my average cost per share much lower.
I always believed that I would eventually be cashing in my huge windfall once Nortel’s stock price began to skyrocket again. Afterall, Nortel Networks was going nowhere but up and all those little free falls in the stock price were nothing but buying opportunities for me. Even my friend Johnny who owns the Bloor and Jane restaurant made the perfect call more than once. On three different occasions, he correctly predicted the price of a single Nortel share.
The first was on a Friday afternoon in the spring of 2001. If I recall the stock price had fallen 75% to about thirty bucks from its all-time record high within the previous year. I was having my usual Friday clubhouse sandwich while we were discussing our usual topics, the Toronto Maple Leafs mixed in with some of my investment strategies. Johnny had no investment strategy and he never bought stocks.
The Nortel story taught me two valuable and life altering lessons. One, to never count your chickens before they hatch. And two, to never put all your eggs in one basket. For me those two lessons would be learned much too late in the Nortel saga.
However they would indeed both be learned and I would learn them the hard way.
Simply put, I fell in love with the company Nortel Networks and all I ever saw were the dollar signs. All the while some analysts were warning that Nortel’s fall from grace was now on the not too distant horizon. However I like most investors ignored those analysts, preferring the advice from the analysts who were always trumping the company and saying what I wanted to hear. So rather than take a safe and cautious approach, I stupidly chose the herd mentality and I just continued to buy more and more Nortel stock. My main investing goal was always to get my average cost per share much lower.
I always believed that I would eventually be cashing in my huge windfall once Nortel’s stock price began to skyrocket again. Afterall, Nortel Networks was going nowhere but up and all those little free falls in the stock price were nothing but buying opportunities for me. Even my friend Johnny who owns the Bloor and Jane restaurant made the perfect call more than once. On three different occasions, he correctly predicted the price of a single Nortel share.
The first was on a Friday afternoon in the spring of 2001. If I recall the stock price had fallen 75% to about thirty bucks from its all-time record high within the previous year. I was having my usual Friday clubhouse sandwich while we were discussing our usual topics, the Toronto Maple Leafs mixed in with some of my investment strategies. Johnny had no investment strategy and he never bought stocks.
"Too risky” he would always say.
I was sitting at the front counter; Johnny flat out told me that very soon a Nortel stock would be the same price as my ten dollar clubhouse I had just taken a bite of.
“No fuck’n way.” I scoffed before my next bite.
“Nortel will hit fifty before it hits a tenner,” I promised him.
After Nortel dropped to ten bucks a share just a few months later I was now eating crow for my lunch. Johnny could not hide his ‘I told you so’ smirk on his face.
Then again one morning while I was eating my breakfast, Johnny made his second prediction.
“Mike, Nortel will soon be cheaper than your five buck western.” He said.
‘No way Johnny, it’ll see twenty before it hits a fiver.’ I proclaimed, forever trying to be the optimistic, fearless investor.
Within a couple months Johnny was once again proven right when Nortel dipped below the five dollar threshold. I had already stopped buying more stock a few weeks previous. I too was now scared that my investment would soon become worthless. I was already down 96% from my $498k peak back in July 2000.
The future indeed looked bleak, but I still had a sliver of hope. There was talk that Nortel would soon form a joint venture with U.S telecom giant Cisco Systems. For sure my investment would recover if the two companies merged.
It just had to. I now found myself pathetically trying to convince myself.
It was all I could do.
Johnny’s third prediction came shortly after Nortel broke five bucks.
“Sorry Mike, but you will be able to buy a Nortel share for less than your morning coffee.” He grinned while shaking his head as he turned away to make my breakfast.
I said nothing how could I argue? Johnny had been right all along.
In May of 2002 you could have purchased a share of Nortel Networks on the TSE for less than a buck or less than a cup of Johnny’s coffee. It would slip down below seventy cents the following month. It was an unforgettable, gut wrenching experience when I saw ...NT.TSE .67... on the corner of the Bay and Bloor TD Bank TSE live ticker one afternoon. I now owned 40,000 shares, ten times more than when Nortel had peaked just two years previously and I had lowered my average cost price by ten times also.
I still did not panic. I still believed I would eventually recoup my investments and at least break even. And if I was lucky maybe even make a small profit. Afterall, for the previous two years I had absolutely no luck playing at the world’s biggest casino. I needed to catch a break, my luck was bound to change.
Sure enough, Nortel stock began to slowly rise.
It was not like the dramatic leaps it had experienced during the 2000 tech bubble, but much smaller gains, slow and steady. Within two years Nortel stock had reached the exact same price that I had averaged down to. Finally this would be my chance, I could sell out and break even without losing a dime.
Did I sell?
Did I walk away from the casino?
Nope, once again greed would consume me. Greed would override any sensible investment advice. Hell, even Johnny was urging me to get out. I rolled the dice once again and I decided I would let my bet on Nortel ride. Besides, everyone was now jumping back onto the Nortel bandwagon. Some analysts were even proclaiming that a forty dollar price target was just a year away. I figured even at $25 multiplied by my 40,000 shares, I would have a cool million in my account. I made a vow to myself; I would sell out at twenty-five bucks.
I was sitting at the front counter; Johnny flat out told me that very soon a Nortel stock would be the same price as my ten dollar clubhouse I had just taken a bite of.
“No fuck’n way.” I scoffed before my next bite.
“Nortel will hit fifty before it hits a tenner,” I promised him.
After Nortel dropped to ten bucks a share just a few months later I was now eating crow for my lunch. Johnny could not hide his ‘I told you so’ smirk on his face.
Then again one morning while I was eating my breakfast, Johnny made his second prediction.
“Mike, Nortel will soon be cheaper than your five buck western.” He said.
‘No way Johnny, it’ll see twenty before it hits a fiver.’ I proclaimed, forever trying to be the optimistic, fearless investor.
Within a couple months Johnny was once again proven right when Nortel dipped below the five dollar threshold. I had already stopped buying more stock a few weeks previous. I too was now scared that my investment would soon become worthless. I was already down 96% from my $498k peak back in July 2000.
The future indeed looked bleak, but I still had a sliver of hope. There was talk that Nortel would soon form a joint venture with U.S telecom giant Cisco Systems. For sure my investment would recover if the two companies merged.
It just had to. I now found myself pathetically trying to convince myself.
It was all I could do.
Johnny’s third prediction came shortly after Nortel broke five bucks.
“Sorry Mike, but you will be able to buy a Nortel share for less than your morning coffee.” He grinned while shaking his head as he turned away to make my breakfast.
I said nothing how could I argue? Johnny had been right all along.
In May of 2002 you could have purchased a share of Nortel Networks on the TSE for less than a buck or less than a cup of Johnny’s coffee. It would slip down below seventy cents the following month. It was an unforgettable, gut wrenching experience when I saw ...NT.TSE .67... on the corner of the Bay and Bloor TD Bank TSE live ticker one afternoon. I now owned 40,000 shares, ten times more than when Nortel had peaked just two years previously and I had lowered my average cost price by ten times also.
I still did not panic. I still believed I would eventually recoup my investments and at least break even. And if I was lucky maybe even make a small profit. Afterall, for the previous two years I had absolutely no luck playing at the world’s biggest casino. I needed to catch a break, my luck was bound to change.
Sure enough, Nortel stock began to slowly rise.
It was not like the dramatic leaps it had experienced during the 2000 tech bubble, but much smaller gains, slow and steady. Within two years Nortel stock had reached the exact same price that I had averaged down to. Finally this would be my chance, I could sell out and break even without losing a dime.
Did I sell?
Did I walk away from the casino?
Nope, once again greed would consume me. Greed would override any sensible investment advice. Hell, even Johnny was urging me to get out. I rolled the dice once again and I decided I would let my bet on Nortel ride. Besides, everyone was now jumping back onto the Nortel bandwagon. Some analysts were even proclaiming that a forty dollar price target was just a year away. I figured even at $25 multiplied by my 40,000 shares, I would have a cool million in my account. I made a vow to myself; I would sell out at twenty-five bucks.
It never happened.
Nortel stock would hit just under $12 before the company would become mired in an accounting scandal. It would see the CEO Frank Dunn and other top executives fired for cause. Four years later Frank along with two other execs would be charged by the RCMP for fraud. Investigations showed they had been cooking the books by falsely stating profits.
Profits that in reality were losses.
Nortel stock continued to plunge and it never recovered. In 2009 Nortel was done and I lost everything. My venture into the world’s biggest casino was now nothing but an abysmal failure. Frank Dunn and his cronies were all acquitted years later after millions was spent during Canada’s longest, largest corporate fraud trial in history. In the end fraud was indeed proven, but the prosecution was unable to prove that the fraud was intentional.
Give me a fuck’n break. I couldn't believe that not one person was held accountable.
But to be honest, it was my own fault.
I had two opportunities to cash in my Nortel stock for huge profits. Yet on both occasions greed and stupidity overruled my better judgement. I broke two of the cardinal rules in investing, or should I say gambling. One, I counted my chickens before they hatched and two, I put all my eggs in one basket. The basket broke and all my eggs got broken, but as it turned out the eggs were all rotten anyway.
Thanks to the three CEOs John Roth, Frank Dunn and Mike Zafirovski. They solely would be responsible for turning Nortel Networks, the 800 pound gorilla into an organ grinders pet monkey. So many lives were ruined over Nortel’s bankruptcy and fall from grace. I will for the rest of my life seethe when I think how my investment simply disappeared and vanished into thin air. When a person loses that kind of money, they search for a scapegoat and I found mine in those three CEOs. They all had their turn running the casino. They all had their turn controlling the money that I was gambling. Yet, I controlled when to walk out with all my winnings.
I never did.
I recall the Kenny Rogers lyric from his 1978 hit song The Gambler ....'You've got to know when to hold 'em, know when to fold 'em, know when to walk away and know when to run.'
I should have run out of the world’s biggest casino on that Monday when I got home from the Hidden Valley Resort back in the summer of 2000.
Now that by far would have been the best investment decision I have ever made.
Nortel stock continued to plunge and it never recovered. In 2009 Nortel was done and I lost everything. My venture into the world’s biggest casino was now nothing but an abysmal failure. Frank Dunn and his cronies were all acquitted years later after millions was spent during Canada’s longest, largest corporate fraud trial in history. In the end fraud was indeed proven, but the prosecution was unable to prove that the fraud was intentional.
Give me a fuck’n break. I couldn't believe that not one person was held accountable.
But to be honest, it was my own fault.
I had two opportunities to cash in my Nortel stock for huge profits. Yet on both occasions greed and stupidity overruled my better judgement. I broke two of the cardinal rules in investing, or should I say gambling. One, I counted my chickens before they hatched and two, I put all my eggs in one basket. The basket broke and all my eggs got broken, but as it turned out the eggs were all rotten anyway.
Thanks to the three CEOs John Roth, Frank Dunn and Mike Zafirovski. They solely would be responsible for turning Nortel Networks, the 800 pound gorilla into an organ grinders pet monkey. So many lives were ruined over Nortel’s bankruptcy and fall from grace. I will for the rest of my life seethe when I think how my investment simply disappeared and vanished into thin air. When a person loses that kind of money, they search for a scapegoat and I found mine in those three CEOs. They all had their turn running the casino. They all had their turn controlling the money that I was gambling. Yet, I controlled when to walk out with all my winnings.
I never did.
I recall the Kenny Rogers lyric from his 1978 hit song The Gambler ....'You've got to know when to hold 'em, know when to fold 'em, know when to walk away and know when to run.'
I should have run out of the world’s biggest casino on that Monday when I got home from the Hidden Valley Resort back in the summer of 2000.
Now that by far would have been the best investment decision I have ever made.
