In U.S. financial slang, a bagholder is a shareholder left holding shares of worthless stocks. It can also refer to the holder of any financial instruments that become worthless, such as the junior bonds of a defaulted company or the coins of a failed cryptocurrency. The word is derived by combining shareholder with the expression “left holding the bag.”
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.
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.
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.
The phrase is also used in association with the practical joke known as a snipe hunt, in which an unsuspecting newcomer is led outdoors and left “holding the bag” in which to catch a creature that does not exist. As an American rite of passage, it is often associated with summer camps and groups such as the Boy Scouts.
- ^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 149731.
- ^“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.
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