F-Squared Investments was an investment management company that was founded in 2006 and grew quickly to manage billions in assets. However, in 2014 it became embroiled in allegations from the SEC that it had inflated its investment track record. This led to large fines, legal issues and the eventual selling of the company in 2016. Understanding the reasons behind the company’s decline through studying its stock price chart provides insights into problems like falsely marketing investment performance. This article will examine key events that impacted F-Squared’s stock price and what investors can learn from its troubles.
F-Squared’s early stock price growth reflects its initially successful image
F-Squared was founded in 2006 and attracted assets rapidly due to its claims of attractive investment performance. The stock price quickly rose from its IPO of $9 in 2009 to over $30 by early 2014, reflecting strong interest in the company’s supposedly market-beating investment products. However, in 2014 the SEC alleged F-Squared misled investors by falsely marketing a track record showing market outperformance since 2001. In reality, the track record only applied to a hypothetical backtest using 2001 data.
Stock price plunged over 70% after SEC allegations
F-Squared stock plunged from over $30 to around just $8 within months after the 2014 SEC allegations became public. The large fine imposed on the company and damage to its reputation from admitting to false marketing of performance history caused investors to lose trust. The stock continued gradually declining over the next 2 years as additional legal issues compounded problems for the company.
Acquisition in 2016 provided exit for stock holders
In 2016 Virtus Partners announced it would acquire F-Squared for $30 million in cash, representing an end to independent operations for F-Squared. The stock price popped briefly back up to around $10 as investors welcomed the deal after years of decline. While shareholders finally had a way to exit ownership, the buyout price represented a huge decline from earlier valuations above $30 before company troubles emerged.
F-Squared Investment’s stock chart reflects the rise and fall of a company that falsely marketed investment performance data. After rapid growth, its stock crashed over 70% when the truth emerged and never recovered as legal issues mounted. The story provides a good case study into the importance of transparency and honesty about investment performance and marketing.