Wildcat business – definition and meaning
A wildcat business is a commercial venture which has a high probability of great profits or total losses. Those who enter a wildcat business venture risk either losing everything they put into it, or striking it rich; making a lot of money.
If you are a risk-averse investor, you will be very reluctant to participate in any type of wildcat business. In fact, even moderately risk-tolerant investors would probably walk away from such opportunities.
The word wildcat is used in many phrases that describe people who take big risks. Wildcats may refer to a specific group of people who enjoy wild and dangerous adventures.
According to the Business Dictionary, a wildcat business is:
“Venture (such as drilling for oil or gas) with a high probability of great profit as well as a similar probability of total loss.”
If you decide to invest in a wildcat business, do not focus only on how much money you could make, remember that there is a real risk of losing your entire investment.
Wildcat business in the oil & gas industry
Wildcat drilling is a good example of a venture with the possibility of large profits or losses. It involves searching for oil and natural gas wells in areas you would not expect – non-typical areas.
Drilling for oil and gas wells, as far as risk-tolerant investors are concerned, is considered as a good investment, especially if the field where the drilling is to take place has consistently produced either oil or gas both in the past and is predicted to continue.
However, in areas where no oil or gas production has ever occurred, drilling is a considerably riskier venture. Such an exploration could be called a wildcat business or wildcat drilling venture.
Regarding the prospect of investing in a wildcat business, Investing Answers writes:
“Wildcat projects carry substantial risk, but they also offer a large payday if the well produces crude or natural gas.”
The term should not be confused with wildcat strike, which is a strike action that unionized workers take without the authorization, support, or approval of the union leadership. This type of strike is sometimes referred to as an unofficial industrial action.