The past 12 years have seen the bursting of two historic bubbles and a string of historic corporate losses. As with any bubble, the value of assets on company balance sheets proved worthless and needed to be written down to current realities. The below firms were some of the biggest casualties and reported losses in the many billions of dollars, which easily qualify as among the largest of all time. One story is still playing out and could reach a trillion.
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AOL Time Warner
At the height of the dotcom bubble, Internet darling AOL (NYSE:AOL), used its inflated stock as a currency to snap up media giant Time Warner. By 2002, it had become apparent that AOL's dial-up business model was in trouble and the combined entity wrote off most of the goodwill created when the two firms merged. The loss that year was listed at nearly $100 billion, which qualifies as one of the largest corporate losses in history. This also continued a write down from the previous year, which started in the fourth quarter and was estimated at close to $46 billion. Both firms decided to part ways recently, leaving AOL to rediscover itself as a collection of websites and The Huffington Post. Time Warner has jettisoned its cable businesses and remains a television and publishing media giant.
American International Group
A casualty of the financial crisis, insurance giant American International Group (NYSE:AIG), reported a loss in 2008 right at around $100 billion. The cost to taxpayers was close to double and was estimated at $180 billion, though close to $70 billion has been reported to have been spent to cover AIG's obligations and to keep the global financial system intact. The Treasury Department still holds a sizable stake in AIG, which remained public. It recently sold $18 billion worth of stock and could end up reporting an overall profit at the end of the day as many of AIG's assets have recovered from their crisis-induced lows. However, shareholders from a few years ago took historic hits on their holdings.
Car giant General Motors (NYSE:GM) was another casualty of the financial crisis and ensuing the Great Recession, but its demise was many years in the making. Its reported loss in 2008 came in at nearly $31 billion and was estimated at close to $40 billion in 2007. The company officially entered bankruptcy protection at the start of 2009. In total, around $50 billion in taxpayer funds was needed to secure GM's survival and its return to public markets. As with AIG, the government could end up with a profit, depending on the level it sells GM stock at.
Fannie Mae and Freddie Mac
There are a number of ways to estimate the losses that the mortgage giants Fannie Mae and Freddie Mac have reported in recent years. They are two of the biggest casualties of the bursting of the housing bubble and continue to require billions in bailout funds given they back trillions of the nation's mortgages.
Fannie Mae started reporting hefty losses in 2007 and reported a loss of $2 billion. This continued to grow and hit $72 billion by 2009. The 2011 loss of $17 billion sounds downright modest in comparison, but demonstrates the extent to which the losses keep mounting. Freddie Mac's loss peaked in 2008 at just above $50 billion and fell to just over $5 billion in 2011. A couple of years ago, Bloomberg estimated the cost of bailing out these two housing giants at $160 billion in aggregate, though it also estimated that the final tally could hit $1 trillion by the time the losses are worked out. However, it will likely take years until the final score is settled.
Another casualty of the dotcom bubble, JDS Uniphase (Nasdaq:JDSU) wrote off the bad investments it made in 2001. The loss was listed at a hair above $56 billion and due to its ill-fated purchases of telecommunication equipment rivals that were set to take advantage of the limitless growth of the Internet. JDS Uniphase continues to report losses, but remained a public firm and has seen its sales triple from the dotcom lows.
The Bottom Line
The Fannie Mae and Freddie Mac debacles remain open ended and final losses could run into the hundreds of billions of dollars, which U.S. taxpayers will end up covering. The other firms hurt their shareholders badly, but are seeing better days in their current incarnations.
At the time of writing, Ryan C. Fuhrmann did not own any shares in any company mentioned in this article.