In U.S. financial slang, a bagholder is a shareholder left holding shares of worthless stocks.
The shareholders could be caught up in a corporate bankruptcy and accounting scandal, as was the case with Enron and Worldcom, or the victims of a pump and dump scheme, in which naive and unsophisticated investors fall victim to e-mail spam, rigged stock tip forums, or other tricks used by stock touts to drive up the shares of worthless penny stocks.
The term has also been applied as a term of derision to real estate investors.
The word is derived by combining shareholder with the expression "left holding the bag."
Real estate investment
If a worthless property is bought with the idea to sell it for a higher price, the gullible person who is stuck owning the property is the bagholder.
Holding the bag
The expression "left holding the bag" originated in eighteenth century Britain and spread throughout the English-speaking world. In this context, a person left holding the bag is stuck with the stolen goods, taking the blame from the police while the rest of a criminal gang escapes.
- Booth, Richard A. (1998). "Stockholders, Stakeholders, and Bagholders (or How Investor Diversification Affects Fiduciary Duty)". The Business Lawyer. 53 (2): 429–478. JSTOR 40687791. SSRN .
- "Still More Housing Bull," by Seth Jayson, The Motley Fool, Aug. 8, 2007
- "Bag Holder - What Does It Mean?".
- "Q&A Left Holding the Bag". World Wide Words. 2002-11-30. Archived from the original on 3 January 2007. Retrieved 2006-12-03.