Tulipmania revives memories of bloom and bust

Nearly 400 years after thousands of people were bankrupted by tulipmania, a modern-day variant of the speculative futures trade is again threatening investors in the Netherlands.

Like their 17th-century counterparts - whose gamble proved worthless when the overheated tulip market collapsed - today's investors fear the money they pent on bulbs may turn to dust. In 1637 a single bulb of the Rembrandt tulip was bought for the price of a grand Amsterdam townhouse. Four centuries later, today's flower fanatics forked out minimum of €100,000 (£70,000) each on the promise of a possible return of up to 30 per cent.

Dutch investigators are examining the circumstances surrounding NovaCap Florales Future fund, an investment vehicle set up to support the development of new and profitable tulip varieties.
About 120 Dutch investors ploughed €85.2m into the fund. NovaCap paid Dutch growers to cultivate new varieties of tulip.
But it now questions the validity of transactions made via Sierteelt Bemiddelings Centrum (SBC), a market maker specialising in new varieties, which found buyers for the bulbs.
The fund is also investigating the status of contracts which SBC is said to have agreed with about 200 mainly Dutch tulip buyers. In one case the contract had been cancelled, leaving investors worried there might be no end-buyer for the bulbs.
SBC, meanwhile, has declared
itself bankrupt. Investors banking on the earning power of new and highly prized varieties of tulips were taking a huge gamble, industry experts said.
The trade was highly speculative, one said, because only a handful of bulbs would yield profitable tulip varieties.