COVER STORY
"I can smell the Ferrari now," chants a fresh crop of instant multimillionaires
Of all the possible values of human society, one and one only is the truly sovereign, truly universal, truly sound, truly and completely acceptable goal of man in America. That goal is money, and let there be no sour grapes about it from the losers.
—C. Wright Mills, The Power Elite
There are many ways to attain great wealth. It can be done legally or illegally, through personal effort or inheritance or marriage. Luck can play a role; so can skill, brains, ambition and opportunity. But big money, the kind of money that buys expansive estates and ocean-going yachts, California vineyards and professional sports teams, is usually reserved for a select few.
A new crop of exceptionally rich people is springing up in America, almost from nowhere. Rarely have so many made so much so quickly. They have a gambler's nerve, a fortuneteller's foresight and a prospector's nose for gold. They have prospered first by starting or investing in small, unknown companies, and then capitalizing on the 17-month-old bull market that has sent the Dow Jones industrial average to one new high after another.
The key to the wealth of the new market multimillionaires is the public's seemingly insatiable appetite for shares in companies selling their stock for the first time. Preceded by a blizzard of legal papers, corporate puffery and prospectuses, new companies are rushing to capitalize on the buoyant market. Last year nearly 900 companies made initial offerings of stock, raising $12.8 bilion. That is almost nine times more capital than was raised by new firms in 1982 and even more than the amount for all the years since 1971 put together. Mutual funds and pension funds, big institutional buyers and individual shareholders have all anxiously sought to invest in the new firms.
Of course, not all the plungers have emerged winners. Some entrepreneurs saw the sunny prospects of their companies turn stormy in a matter of weeks, and their paper profits vanished as quickly. Other investors got caught in a temporary market downdraft during the second half of 1983. Irrational enthusiasm pushed up the price of some high-technology stocks to 80 or more times their annual earnings, compared with about 16 times earnings for proven blue-chip growth companies like IBM. When reality caught up with greed, a number of fast-rising new issues fell to earth, and the profits of many backers fell with them.
The shakeout required many companies to re-evaluate their plans. Some firms scaled down their public offerings or postponed them. But the march to market continues. Although December is usually a poor time to catch Wall Street's attention, 105 companies sold stock for the first time last month, and the fast pace is expected to continue this year. Among the firms making initial offerings last week were DNA Plant Technology, a New Jersey agricultural genetics firm; Sporto, a Boston manufacturer of women's foot wear; and Thor Industries, an Ohio maker of motor homes and trailers. Some of the largest firms going public are savings and loan associations, which are trying to raise capital after several years of disastrous losses. But the most intriguing companies for Wall Street are ones that have names beginning with "bio" or ending in