It was a great deal, at the time.
John W. Houghton bequeathed stock in Georgia Railroad Bank to the Richmond County Board of Education. Unfortunately, as banks were bought, sold and consolidated, that stock is now shares of Wachovia, a financial institution whose value has plummeted as of late.
At its peak in 2006, the stock was valued at $61 a share and was as high as $52 earlier this year, but on Wednesday it was valued at less than $6, having lost more than 90 percent of its worth in two years.
On June 30, 2006, the school board's 13,084 shares were worth $707,583, Controller Gene Spires said. A year later, it slipped to $670,555. And, June 30, it fell to $203,195.
The situation underscores the importance of diversification, said school board member Alex Howard, a Georgia Bank & Trust financial consultant. It's a lesson everyone can learn.
Mr. Howard has been warning the board for months about the dangers of leaving investments in one stock and not diversifying.
But the school board's hands were tied, prohibited from selling the stock or altering the investment by the estate, which gave the gift to the school system. The board would need to go to court to overturn the estate and gain the flexibility to move money around the stock market.
To avoid this from happening again, Mr. Howard said he will be asking the board tonight to consider a policy or a procedure for accepting financial gifts, such as stocks, so the board has greater flexibility.
When the economy is growing, little attention is given to how money is invested, said Dr. Mark Thompson, the Cree Walker Chair of Business Administration in the Hull College of Business at Augusta State University. The stock market has its normal ups and downs, but the market has had a string of down days, and some are learning the hard way.
It's the practice of the ASU Foundation to immediately sell any stock given to the university, said Helen Hendee, the vice president for development and alumni relations.
"Sometimes it might go up, but sometimes it might go down," she said.
Ms. Hendee said it's not unusual for stocks to be given as a gift because donors can avoid paying the capital gains tax by contributing to the university.
Mr. Spires said Mr. Houghton designated his gift as a way to help pay teacher salaries.
Reach Greg Gelpi at (706) 828-3851 or greg.gelpi@augustachronicle.com.
HALT CONTINUES
NEW YORK --- Citigroup and Wells Fargo agreed Wednesday to extend their legal standstill in the fight for Wachovia until Friday morning, giving the banks more time to work toward a mutual agreement.
After the battle for the Charlotte, N.C.-based bank moved to both state and federal court over the weekend, the parties agreed Monday to a cease-fire at the urging of Federal Reserve officials.
But that agreement expired at noon Wednesday without a resolution on the fate of Wachovia.
The extension of the standstill suggests that the parties believe an agreement is reachable.
-- Associated Press
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