What are goldbrick shares?

By Richard Wilson AAA
A:

Goldbrick shares are securities that look valuable when, in fact, the stock is not worth very much. Goldbrick shares occur most often during surplus times when excitement grows around an undeserving company and its stock price goes up. Increased interest in the company leads more investors, who have high hopes of capturing a portion of the expected profits, to buy shares in the hyped company. In this way, a normally low-value investment escalates to an inflated value.

A famous example of goldbrick shares is the incredible rise of Bre-X Minerals Ltd. Bre-X was a small mining company based in Calgary, Canada. In 1995, the company reportedly discovered a large gold deposit in one of its drilling sites in Indonesia. The news drove low share prices to a peak of C$286.50 as investors fought to benefit from the discovery. Eventually, the amount of gold unearthed at the site was determined to have been exaggerated and share prices plummeted. Meanwhile, investors rushed to withdraw their money from the failing company. Goldbrick shares are not always created by fraud, but fraudulent activity is evident in some cases.

(For more on this topic, read The Biggest Stock Scams of All Time.)

This question was answered by Richard C. Wilson.

RELATED FAQS

  1. What was the Mahonia company and why did it become the subject of a lawsuit?

    In 1992, J.P.Morgan went into the energy trading business by creating a venture company called Mahonia Limited. At least, ...
  2. What was the most notable hostile takeover of all time?

    The drama of the RJR Nabisco takeover and wide coverage make it one of the most notable takeovers in history.
  3. What are the dangers of using the Electronic Federal Tax Payment System (EFTPS)?

    The Electronic Federal Tax Payment System (EFTPS) is a convenient way to file your taxes, but you need to be aware of some ...
  4. Is there ever a bad time to invest in gold?

    Gold has been a stellar performer so far in this millennium, having racked up 11 straight years of gains since 2000 and appreciating ...
RELATED TERMS
  1. Financial Action Task Force (FATF)

    An intergovernmental organization that designs and promotes policies ...
  2. Banker Trojan

    A malicious computer program designed to gain access to confidential ...
  3. Black Market

    Economic activity that takes place outside government-sanctioned ...
  4. Bear Raid

    The illegal practice of ganging up to push a stock's price lower ...
  5. Voodoo Accounting

    Creative rather than conservative accounting practices. Voodoo ...
  6. Cookie Jar Accounting

    A disingenuous accounting practice in which periods of good financial ...
comments powered by Disqus
Related Articles
  1. How The Patriot Act Works & Why Is It ...
    Investing News

    How The Patriot Act Works & Why Is It ...

  2. The Better Inflation Hedge: Gold or ...
    Investing News

    The Better Inflation Hedge: Gold or ...

  3. What You Need To Know About Insurance ...
    Insurance

    What You Need To Know About Insurance ...

  4. What Investors Can Learn From Insider ...
    Markets

    What Investors Can Learn From Insider ...

  5. 4 History-Making Wall Street Crooks
    Personal Finance

    4 History-Making Wall Street Crooks

Trading Center