By Arnold Kling
Wray alleges he received word from Fisker on January 18th in the form of a letter informing him that due to the need for equity capital financing there was now a pay to play action in effect — Fisker wanted Wray to invest $83,922.32 on top of his previous investments. If Wray failed to do so by January 27th Wray would allegedly lose rights that he received when he first purchased Fisker stock. Rights such as a discounted price if the company went public, protection against dilution of his shares by later purchasers, and preference in a bankruptcy.
I feel Wray’s pain.*
But remember, just like GM, this is government motors. Steven Chu thought it would be a good idea to put money into Fisker–not his, but yours and ours. I had a problem with this right from the start.
*Basically, a failing entrepreneur is like a drowning person–if you try to help, they are likely to drown you yourself as they flail in desperation. Only if you’re well trained is it safe to attempt a rescue. As an angel investor, I was never trained, and I should never have gotten involved. My worst experience was when a new investor came in and converted my secured loan into equity, creating a huge taxable “gain” for me, and of course wiped me out completely (the “equity” was worthless).