Chapter 11
Short Selling IPOs
A famous example of short selling takes us back to the debunked carpet-cleaning company ZZZZ Best, founded in November 1985. The founder of the company, Barry Minkow, was in his early twenties.
In 1987, the Feshbach brothers, investors who specialized in selling short, began to spot some peculiarities with the company. First, ZZZZ Best announced an extraordinary $8 million contract for carpet cleaning of two buildings in Sacramento. After some research, however, the Feshbach brothers determined that the largest carpet-cleaning contract to date was a mere $3.5 million awarded for cleaning the carpets at the MGM Grand and the Las Vegas Hilton. Therefore, the $8 million announcement from Minkow looked like a sham.
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