Mergers are notorious for producing bad returns for investors. Another example of this has emerged today with Hewlett-Packard writing off $5bn in its latest accounts from its 2011 merger with Autonomy, a British technology and software company. HP are claiming accounting irregularities (fraud), which meant that it overvalued the company. Autonomy's founder, however, is claiming that HP simply destroyed value after the merger! You can read BBC and Guardian coverage here and here.
My colleague and former PhD student Gareth Campbell has created a website about the British Railway Mania - click here . This episode has been described by the Economist as probably the greatest bubble in human history. Gareth's website provides background on the Mania and posits some explanations for the 'bubble'. In his explanation of why the bubble happened, Gareth places a lot of emphasis on investor myopia regarding future dividends and uncalled capital. His study of investors during the episode does not support the view that this episode was fuelled by naive and irrational investors.