Fire sale

A fire sale is the sale of goods at extremely discounted prices. The term originated in reference to the sale of goods at a heavy discount due to fire damage. It may or may not be defined as a closeout, the final sale of goods to zero inventory. They are said to occur in the financial markets when bidders who value assets highly are prevented from bidding on them, depressing the average selling price below what it otherwise would be. This lowering of the price can cause even further issues because it may be inaccurately perceived as signaling negative information.[1]

History

The term is adapted from reference to the sale of fire-damaged goods at reduced prices. In Proceedings of the Fitchburg [Mass.] Historical Society and Papers Relating to the History of the Town Read by Some of the Members the following entry is found:

In December, 1856, the account of an extensive fire in the American House mentions the following occupants: E. B. Gee, clothing; T. B. Choate, drugs; J. C. Tenney, boots and shoes; Maraton Upton, dry goods; and M. W. Hayward, groceries. Maraton Upton removed his stock to No. 9 Rollstone block, and advertised "Extraordinary fire sale; customers are invited to call and examine goods which are still warm."[2]

The term also has a counterpart in "railroad salvage", the discount sale of goods damaged in derailment or other accidents.

Examples

  • Allowing the lowest bidders to purchase land and hotels.[3]
  • Taking advantage of purchasing opportunities by acquiring more companies in the software world.[4]

See also

References

  1. ↑ Shleifer, Andrei; Vishny, Robert. "Fire Sales in Finance and Macroeconomics". Journal of Economic Perspectives. 25 (1): 29–48. doi:10.1257/jep.25.1.29. Retrieved 20 April 2018.
  2. ↑ Proceedings of the Fitchburg Historical Society and Papers Relating to the History of the Town Read by Some of the Members. iii. Fitchburg, Massachusetts: Historical Society. 1902. p. 210.
  3. ↑ "Phoenix has terrible business judgment, and that hurts your wallet". Greenville Online. Retrieved 31 July 2018.
  4. ↑ "Buying up software companies in the NASDAQ fire sale". www.designnews.com. Design News. July 5, 2001. Retrieved 31 July 2018.
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