The dot-com bubble, known as the "internet bubble" or the "Information technology bubble," saw its greatest boom from 1995-2000. The frenzy was created by the companies simply adding the "e-" prefix to their name and or a .com to the end and it would increase the share price dramatically.
The amount of speculation and cash fueled by venture capitalists made the internet stocks soar. While P/E ratios and other technical indicators were ignored.
What can that teach us today? Currently we are seeing a large amount of internet and social media IPO's entering the market such as Angie's List, LinkedIn, Pandora, and many more. The commonality for most of them is that they are over hyped and over speculated.
As we saw earlier last year, companies like Zillow (Z) had a first day increase of 185.4%, LinkedIn saw an IPO debut of an increase of 84.4%, Groupon soared 40%. But how have these companies fared since their initial IPO's?
According to IPO Dashboards, Social and Internet companies this year are trading on average almost
25% down from their offer prices. Compare that to the 2011 class average
of down 10%, or even the NASDAQ despite just a slight fall of 1%
year-to-date.
I would make the assumption that many investors are playing off they hype of similar to the dot com era in the late 1990's. The numbers show that internet/social IPO's have been decreasing with the apparent drops in stock prices.
Still lurking in the shadows is Mark Zuckerberg, and his behemoth Facebook recently filing for its IPO. Facebook is a latecomer in the internet and social public debuts, but will no doubt be a huge success. The big question investors are facing is whether or not they believe in the social media guru's vision and leadership of the company.
With the corporate structure of the company, Zuckerberg will have a 57% voting power for the company with his class B stock which count for 10 votes per share. An overwhelming majority over any other stakeholder will ultimately lead investors to choose whether they think he can guarantee them a return in the long run
