In financial slang, a bagholder is a shareholder left holding shares of worthless stocks.[1] The bagholder typically bought in near the peak, when people were hyping the asset and the price was high, and held it all the way through steep declines, losing a large amount of money in the process.
It can also refer to the holder of other assets and financial instruments that become worthless, such as the junior bonds of a defaulted company or the coins of a failed cryptocurrency. The word is derived by combining shareholder with the expression "left holding the bag."
The shareholders could be caught up in a corporate bankruptcy and accounting scandal, as was the case with Enron and Worldcom, or be the victims of a pump and dump scheme, in which investors fall victim to e-mail spam, rigged stock tip forums, or other tricks used by stock touts to drive up the shares of worthless penny stocks.
If a worthless property is bought with the idea to sell it for a higher price, the gullible person who is stuck owning the property is said to be the bagholder.[2]
The expression "left holding the bag" originated in eighteenth century Britain and spread throughout the English-speaking world.[3] In this context, a person left holding the bag is stuck with the stolen goods, taking the blame from the police while the rest of a criminal gang escapes.
The phrase is also used in association with the fool's errand known as a snipe hunt,[4] a practical joke in which an unsuspecting newcomer is led outdoors and left "holding the bag" in which to catch a creature that does not exist.[5] [6] As an American rite of passage or haze, it is often associated with summer camps and groups such as the Boy Scouts.[7]