The United Wireless Telegraph Company was originally formed in 1906 by stock promoter Abraham White from the remnants of the Amalgamated Wireless Securities Company. It then took over for $1 the assets of American DeForest Wireless Telegraph Company, a bankrupt communications firm that had been set up by another promoter, Christopher Columbus Wilson. The takeover enabled Wilson to keep the firm’s assets out of the hands of DeForest’s many creditors. But by early 1907 the two promoters had a falling out. Wilson organised a boardroom coup that led to him taking over as president of United Wireless.
What was the scam?
What happened next?
Wilson’s decision, effectively, to give equipment away led to the United Wireless Telegraph Company becoming one of the largest firms in America. However, complaints about the way it was run and promoted led to an investigation by the US Postal Service in 1910. This resulted in Wilson and four other executives being convicted of fraud. Wilson died in prison. Mounting losses from the aggressive pricing strategy forced the firm into bankruptcy in July 1911. It later lost a patent infringement lawsuit.
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Lessons for investors
A result of the lawsuit was that Marconi bought United Wireless Telegraph Company in exchange for Marconi shares worth just $1.1m. This meant that shareholders received only $2 a share – 96% less than the $50 a share that some of them had paid at the peak of the bubble. United Wireless Telegraph Company was not the only radio company to be exposed as a fraud at around this time: the founder of rival Continental Wireless Telephone and Telegraph Company also ended up in prison. A general rule is that whenever a new technology or industrial sector appears, fraudsters will attempt to cash in. Buyers beware.
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