Newsweek reports on the fundraising woes of cheating website Ashley Madison, despite their profitability:
“You’re basically talking about a company that’s in the sin business,” says Lloyd Greif, president and chief executive officer of the L.A. boutique investment bank Greif & Co. “I think there are quite a few institutions that would have some explaining to do as to why they’re owning this stock.”
Lise Buyer, an IPO consultant who helped Google prepare for its 2004 public offering, says, “I wouldn’t go so far as to say it’s a nonstarter out of the gate. But given the company’s, um, unusual business, investors will likely apply a discounted multiple when comparing this business to others with similar growth and profitability prospects.” (Translation: Ashley Madison shares could be a bargain.)
Investors in Ashley Madison can expect to make unusual profits: “Ashley Madison made $30 million in profits on $90 million in revenues last year, and expects $40 million in profits on $120 million in revenues this year.” Other investors’ reluctance to invest has driven down its share price, meaning you should be able to get bigger dividends for a smaller buy-in than for the average stock.
Is it morally permissible to invest in Ashley Madison? Virtually no one would defend cheating, even those who have done it. By investing in Ashley Madison, you are facilitating cheating, but in a market economy, you also know that if you don’t invest, others will — and reap the profits you have foregone.
Still, the fact that the vicious may benefit from your virtue is not a reason to be less virtuous. And delegating wrong-doing to others is still wrong-doing. Furthermore, by withholding investments, anti-adultery investors have forced Ashley Madison to have to pay a higher cost of capital than a normal business.
Think about analogous examples. Would you invest in a company that marketed alcohol, marijuana, or tobacco to kids? (Imagine it’s legal to do so.) Would you invest in a company that helped students cheat on exams? Would you invest in a company that sold murder for hire? Or child prostitutes? Or slaves? Some of these things are worse than others, but the principle is the same. If it’s OK to invest in Ashley Madison, then it’s OK to invest in meth dealing, contract killing, child prostitution, and slavery. If it’s not OK to invest in those things, then it’s also not OK to invest in Ashley Madison.