Investor enthusiasm for Internet-based businesses has fueled not only rapid growth in the market for IPOS but also has created millionaires. Morgan Stanley has become the “Big Daddy” of Wall Street for these internet IPOs with JP Morgan and Goldman rapidy closing in.
The daily news flashes of the internet stocks reminds me of the dot-com bubble of the late 1990s that marked an era of rapidly increasing stock prices, market confidence that highly speculated the company profits, individual speculation in stocks and widely available venture capital that created an environment in which many investors were willing to overlook traditional metrics such as P/E ratio in favor of feigned confidence in technological advancements.
Speculation is said to be the mother of all Evils and as consequence the bubble had to burst and many internet companies could not weather the financial burden and many were forced to file for bankruptcy. So, booming IPOs of companies such as LinkedIn and likely Groupon, Facebook and Zynga are creating another tech bubble??...We have to wait and see what the future has in it.
The point is that investors are hungry for growth and so perhaps are chasing the fast-growing tech names. Hence, it’s almost hard to blame them. Investors are paying very full prices for tech stock debutantes. The market analyst point out that public-market investors “are paying for what they think companies are worth in 2015, not in 2011”. So, are they become too greedy and shortsighted to make short term profits? No. It’s the dawn of the social networking era and as far as greed is concerned, I can recollect what the Legendary Gordon Gecko of the famous Wall Street movie (1987) said at the Annual Shareholders meeting of Teldar paper: “Greed is good. Greed clarifies, cuts through and captures the essence of the evolutionary spirits. Greed in all forms: greed for life, greed for money, greed for love and greed for knowledge has marked the upwards surge of the mankind”
Linkedin had its extravagant debut in May and the investor response was far beyond the market expectation. It reached a share price of $122 on the first trading day itself. I have been continuously monitoring Linkedin for the past two weeks and its share price has changed 56% when compared Monday July 11th close (101.30) to that of June 23rd ($65.8). The Market Cap has peaked to $9.63 billion as of Monday July 11th, 2011. In another recent development Linkedin has surpassed slumping Myspace as the second-most popular online social network in the US in terms of Web traffic behind Facebook . Although Myspace still has an estimated 130 million active users, compared with roughly 115 million for LinkedIn. Linkedin seems to be crushing other professional networking sites just as Facebook is doing the same for the more social of the social networking sites. However, not even Linkedin and Facebook seem to have nailed down a solid business or revenue model just yet. With the lining of IPOs of Zynga, Groupon and Nexon, I think the market is set for huge IPO of Facebook, the dominant social-networking company expected to go public next year at a valuation of over $100 billion. These valuation may seemed a little skewed with Google+ entering the space with new features and new strategies….So, investors are betting high on the social networking sites…..
Check out the space for more on internet IPOs and the debut of Zynga, Groupon and Nexon…….
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