Throwing Good Money After Bad at Value America

from the the-money-pit dept

This is happening in a lot of dot com companies today as investors are trying to salvage some sort of return on all the money they’ve dumped into questionable companies. The latest is Value America. What’s surprising, though is the article that was written about it in ZD, which basically is saying the exact same thing I am. Usually the articles ignore the “throwing good money after bad” angle, and say “oh, look, this company is doing well ’cause they just raised a lot more money”. I’m glad to see some reporters are seeing things for what they really are.

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Comments on “Throwing Good Money After Bad at Value America”

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Ed says:

Gambling or Investing?

In gambling, throwing good money after bad is considered a quick way to lose your bankroll. The irony is that the same behavior, in the form of dollar cost averaging or just plain “buy low, sell high” is considered sound investment strategy. So if you’re really investing for sound reasons (as opposed to speculating), then putting more money into a business with potential makes sense, as long as the potential is really there.

The trouble is that recently there has been a complete disconnect between sound reasoning and investment decisions, and recent fluctuations haven’t changed that yet. Eventually investors should desert the companies without sound businesses, but what seems to be happening so far is that speculators sell a dot com on Monday and buy it back again on Tuesday.

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