◼ FINANCE Bloomberg Businessweek November 23, 202026
● TheSECinvestigatesa companythatsaiditssand
couldhelpfrackerspumpmoreoilTheSecretintheSand
Onebyone,fouremployeesofFairmountSantrol
wereusheredintoa crampedhotelconferenceroom
inStafford,Texas,wheretheytookturnsexplaining
totheirbosseswhytheythoughtthecompanywas
committingfraud.Someoftheproprietarysandit
wasselling,theysaid,wasn’tsospecial.
Sand?Duringtheshaleboom,thissimple-sounding
stuffwasa hotcommodity.Drillersusesandand
waterdeepundergroundtoblasthydrocarbons
from rocks in the process known as fracking, and
Fairmount was selling specially manufactured sand,
including one product that was touted as “revolu-
tionary.” After the May 2017 meetings, nothing much
changed in the way the business operated, attend-
ees say. But others were watching, too. This sum-
mer the U.S. Securities and Exchange Commission
informed the company, now called Covia Holdings
Corp., that it was considering enforcement action.
The company’s special sand was never a dom-
inant product, but in a competitive industry its
marketing campaign drew attention to Fairmount
Santrol. The company merged with another to form
Covia in June 2018. It became the biggest frack sand
producer in the country. Houston investment bank
Tudor Pickering Holt & Co. called the new company
the “800-pound gorilla in the sand game.”
Some of its success, however, may have been based
on a lie, according to interviews with former employ-
ees, multiple whistleblower complaints, and other
court documents. They tell the story of Fairmount
Santrol scientists running tests on the proprietary
sand that found that some of the company’s most-
hyped products didn’t perform all that much better
than the stuff that came straight from the ground. But
theysawa differentstorybeingpitchedtocustomers.
“Thisfraudisparticularlybrazenbecausethe
companyaggressivelymarketsscientifictestingto
createtheillusionofprovenperformanceandreli-
ability,”onewhistleblowersaidin 2017 ina com-
plainttotheSECseenbyBloomberg.Thenextyear
anotherwhistleblowerblamedexecutiveswho
“whollyadoptedandreinforceda cultureofcover-
ingupitslieswithoutregardtowhomightsuffer.”
Covia,whichfirstdisclosedtheSEC’sinquiryin
May2019,saysina statementthatFairmountSantrol
“fullyinvestigatedissuesthatwereraisedbyemploy-
ees”anddeterminedtherewasnoinstanceoffraud.tragic flaw, but in 2020 that has been a strength.”
While the S&P 500 has swung an average 1.5%
a day in 2020, the second-most in the last seven
decades behind 2008, data compiled by Bloomberg
show, the trend of those moves has been remark-
ably constant in its direction: higher. Either despite
or because of that, only 39% of large-cap active fund
managers are beating their benchmarks, data from
JefferiesLLCshow.
Themarkethascooperatedtoanuncannyextent
withcertainappetitesofdaytraders—particularly
their love of stocks with low per-share price tags. On
March 23, the day stocks bottomed after the corona-
virus crash, more than 420 stocks in the Russell 3000
carried prices below $5. Since then, those shares have
surged an average 124%. Meanwhile, companies with
a share price above $5 have gained an average 74%.
A solid gain, either way, but an even bigger win for
fans of lottery tickets.
Robinhood clients bought the dip in March, with
daily trading volume three times what it was in the
fourth quarter of 2019 and the amount of cash added
to accounts 17 times the monthly average that same
quarter, according to a Robinhood spokesperson.
At TD Ameritrade, clients were net buyers in March,
“way before the rest of the market,” says the firm’s
chief market strategist, JJ Kinahan, and have remained
so. Users of TD Ameritrade, especially millennials,
gravitated to travel-related stocks at the bottom. At
E*Trade, “traders acted quickly to buy the dip” and
moved into sectors associated with a growing econ-
omy, says Chris Larkin, the firm’s managing direc-
tor of trading and investment products.
Zilla Saldana, 33, who works in public relations,
has been trading for only a few months, but she
says she hasn’t made a single trade without doing
her research. First, she bought shares of Apple.
Then she branched out to the likes of electric vehi-
cles. “I wouldn’t say I got lucky,” Saldana says. “I
would say I did research and chose stocks based
off of my findings.”
To the professionals, all the euphoria may amount
toa negativesignalformarkets,butknowingwhen
tobackdownisn’teasy.“Whenthecasinostarts
printingmoneyforthegamblers,there’ssome-
thingwronggoingon,”saysPetervanDooijeweert,
managingdirectorofmulti-assetsolutionsatMan
Solutions.Butif in 1999 youusedretailactivityasa
reasontosellstocksorbetagainstthem,headds,
“youmight’vegottenfiredsixtimesbeforethemar-
ketcollapsedin2000.”�SarahPonczekandClaire
Ballentine,withCaseyWagnerandVildanaHajricTHE BOTTOM LINE Retail investors are having a remarkable run
in 2020, but the stars have all aligned their way. It takes years—or
even decades—to distinguish skill from luck.▼ Fracking sand
production,in tonsQ1 2011 Q3 202030m150▼ U.S. oil production,
in barrelsQ1 2011 Q3 20201 5m0