No, I think you’re not getting my point.
All that ‘stated price’ means is that the LAST transaction for a stock was at price XX. It has no real bearing on what the next sale price will be.
Even with an established value a share of a stock may be worth more or less to any two people involved in a transaction. A posted price is a guideline…not an actual value.
The fact remains, however, that people often - indeed most of the time - base much of their judgement on the last transaction price. It may only be a guideline, but it’s one of the most important ones that people use in day-to-day practice. To say it has no real bearing on the next transaction is ridiculous - if this were true, why bother follwing share prices at all?
Hawthorne, I receive these sorts of ‘offers’ fairly regularly. I just threw one in the bin last week. If I get another one within the next few weeks, I’ll scan it and put a link in this thread.
FWIW, the letters are all straight offers to buy shares at ‘x’ amount. There is no ‘great value’, ‘good timing’ or any catch phrase words or flashy designs to try and ‘sell’ the purchase. Just straight offers.
I’m happy with the courts decision and can’t see how it is fraud at all.
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**On Hawthorne’s first statement, an argument could be made that predatory trading moves securities into the hands of informed investors (such as the Defendent in the OP) away from the hands of uninformed investors (the dolts who would sell him their shares at less than market value). Capital market theorists may argue that informed trading goes some way to settling equilibrium prices for securities – ie, it helps eliminates uninformed trading, which is prone to overreact to any news and underreact to the more subtle factors which affect the underlying value of the security. One may argue that this “smooths” market trends and enhances long-term market efficiency. In that way, this “parasitic” business may be good for the economy.
Well, so some would argue. 
As to the OP itself: let the buyer beware. I agree with the court’s decision.
Yep, I’m an economist. I work at a University in a group of applied economists. I also teach what might be thought of as the economics of government.
I’ve posted before on my general thoughts about wealth creation, so rather than type out a long post, I’ll link to this rather good discussion. I’m not the sort of economist who’s never met a market transaction he didn’t like. Markets work well in some circumstances, not so well in others. But equally I’m not the sort of economist who looks at every market and sees failure requiring correction. Sometimes the cure is worse than the disease.
The sort of contract I mentioned in the OP is an example of resources that could have been used to make stuff people like being squandered (Johnathan Chance’s and Narrad’s heroic attempts notwithstanding). It’s an example of “rent seeking” - the use of resources in attempt to get hold of already existing wealth. From an equity point of view, I guess I’m more concerned than some here about the stupid being fair game. From an efficiency point of view I’m troubled by it even though it’s probably one of those “cure worse than disease” cases.
Most economists - me included - think of speculating as generally a good thing. Most of the time speculation stabilises markets (which benefits other transactors) and ends up providing better information to market participants of the real opportunities faced by society. And if speculators screw the market up, usually they are the big losers in the process. So speculation and the financial markets generally perform valuable services and are not mere paper shufflers.
But there are problems. One is that the very large financial markets we have seem to exhibit greater volatility than the new information arriving on the market day by day seems to justify. The Australian dollar, for example, has traded up and down by more than a percent of its value in the last week or so, seemingly due to jitters rather than new information. This volatility and the possibilty of overcorrection by finance markets has the potential to impose real and large costs on non-speculators. Soros gained from some of these events and lost from some. But when he lost, he did not suffer as much as (say) the people of Indonesia, whose encounter with the financial markets over the last decade appears to have reversed several decades of improved living standards.
The second thing about Soros is that some of his gains were transfers from taxpayers. He made a great deal of money from the UK when they foolishly tried to stay in the European exchange rate mechanism band a few years ago. But he was only able to do that because the British government was very stupid.
Excessive volatility could be fixed with a small turnover tax on forex transactions (known as the Tobin tax). Events like Britain’s Black Wednesday?Monday? could be avoided by either not having a fixed exchange rate or by really fixing it (by abolishing your own currency).
Hawthorne:
Good post. To tell you the truth, i agree with most of what you say. And, while i’ve been defending the judge’s decision with regard to your OP, i’m still not a big fan of the type of “rent seeking” that the guy was engaging in.
I was, in some ways, more interested in playing devils advocate, because i sometimes find in discussions like this that people who are constanly extolling the virtues of the free market when it works in their favour are also often the first to call for regulation when it doesn’t.
I suppose what i’m trying to say is that, in my own sense of what is fair and what is not, the practices carried out by the OP are pretty repellent and not very useful. But by the economic and legal standards that seem to dominate western societies in this day and age, they are well within the bounds of acceptable practice.
I also do have sympathy for people who get caught in this type of scam, and i tend to agree with you that “stupid being fair” is a rather too simplistic way of looking at this sort of thing.
For me, one of the biggest problems with the whole stock-holding system is that it so often encourages people to look only at the short-term and narrow view, and causes a shift away from the idea of benefitting all the stakeholders in a business (including the workers) and towards a notion that simply maximising stock prices is the be all and end all. Adam Smith’s notion that a society of individuals each pursuing his or her own self-interest will serve to produce the most wealth and the best society is, it seems to me, increasingly difficult to justify in some aspects of the modern economy.
I liked your take on the Aussie dollar, and i agree with it completely (on a personal level, i’m making a trip home to Australia in July, so i’d be happy to see it down around 50c again ). I also liked your point about the transfer of public wealth to private hands, as in the Soros case. While it works somewhat differently, public-private wealth transfers have been a constant problem in the US. The whole military-industrial complex of the post-WWII era has served as a channel to shift public money to private hands. I suppose you could argue that all these military contractors - Lockheed Martin, IBM, GE, Westinghouse, McDonell Douglas, etc. - have provided plenty of jobs over that time, but the real winners have been the owners/shareholders, who have been living off the public tit for that whole period. And have been doing so during a time when conservatives (including some of the CEOs of those same companies) have been whining about government spending on things like welfare, social security, medicare/medicaid, etc.
Anyway, i think we’re probably closer on the issue of the OP than i suggested in my earlier posts.
That’s bad news for you, because I’m confused about it.
I posted this because I felt the situation a bit icky. But I guess it links to one of my ongoing questions, which is how decisive are people’s actions as indicative of their real interests when they have a moderately clear choice. A contract without fraud or intimidation in this case doesn’t quite convince me.
You comments on shareholders are interesting. Part of the job of being a shareholder is monitoring the performance of management. This is a difficult job, but it certainly the case that many shareholders rely on others to do the job for them for nothing. It is only to be expected that large companies - like governments - might be expected to stray if poorly monitored.