Pure speculation
Dot-com companies were all the rage in the late 1990’s with the internet the new kid on the block.
Speculative investing was rife and led a 400% climb in the U.S. Nasdaq between 1995 and 2000. By October 2002, it had collapsed by almost 80% from its peak.
Nasdaq valuation tripled
Since 2016 the Nasdaq has nearly tripled in value, with the market values of several large cap tech stocks, such as Amazon, Google and Facebook all passing the $1 trillion valuation. Microsoft and Apple are currently worth more than $2 trillion each.
Now, excessive valuations of private tech firms are causing concern for some investors.
Mega deals
The U.S. payments processor Stripe was valued at $95 billion in March 2021, illustrating the benefit of start ups staying private for longer. It was formed in 2009 and had revenue of $7.4 billion in 2020.
A record 249 U.S. firms achieved $1 billion unicorn valuations in the first half of 2021 analysts say. That’s almost double the number of unicorns produced during the whole of last year.
The number U.S. ‘mega’ deals exceeding $100 million or more has climbed to 751 so far in 2021 – already beating the 665 achieved in 2020.
Is this similar to 1999 when the Dot-com bubble was about to burst?
FOMO, Hype and Speculation
So, what are the differences between now and the dot-com bubble of 1999? Very little really in my opinion, but the bubble of 1999 was driven more by hype than by fundamentals whereas now, despite the pandemic – the fundamentals are believed to be more realistic – but are they?
It is all very heavy speculation, whichever way you look at it. Especially with SPAC’S. Whichever way you may look at it – it’s all hype and speculation really!
SPAC – Special Purpose Acquisition Company
The Special Purpose Acquisition Company, or SPAC, has provided another alternative for high growth firms thinking of making their public market debut. Another type of financial vehicle to enable speculative investments.
These are primarily companies that have made little or no real profit but have massive valuations – a promise for the future. Basically a blank cheque…
It’s nuts! No value, but worth billions!
The similarities are concerning. And as I write U.S. indices are still climbing to new record highs…?